2014 (12) TMI 556 - AT - Income Tax

Unexplained cash deposits - Failure to substantiate claim through documentary evidence Held that - The assessee s case was selected for scrutiny assessment under computer random selection scheme - the assessee maintained a bank account with ING Vysya, Connaught Place vide account NO. 503010008101 and the total deposits in the Bank account amounted to ₹ 12,63,176/-which included few cheque deposits and most of the deposit was by way of cash - In order to prove his bona-fides the assessee had also filed a copy of the appointment letter from both the companies, wherein, the terms of employment was clearly spelt out along with the pay and allowance offered to the assessee was also revealed - the cash deposit was made on various dates into the account of the assessee and the deposits were supported by the confirmation given by the various signatories of both the companies, wherein, it was categorically stated that the amount was deposited by the companies into the account of the assesse for meeting the expenditure as per instruction given by them to the assessee from time to time - When the deposits in the bank account was supported by satisfactory evidences and it was explained by the assessee, no adverse inference could have been drawn and the deposit could not be termed as income from undisclosed source of the assessee thus, the order of the CIT(A) is upheld Decided against revenue. Deletion of penalty u/s 271(1)(c) Income concealed and inaccurate particulars furnished or not Held that - ClT(A) was rightly of the view that the assessee has disclosed full facts pertaining to his income made in the return - the assessee neither concealed his income nor furnished inaccurate particulars of his income - there was no finding by the AO that the source of the cash deposit made by the assessee in his bank account was not bona-fide - merely because the deposit appeared in his account and the addition so made to his total income does not necessarily lead to the conclusion that the assessee is guilty of furnishing inaccurate particulars of his income - The furnishing of inaccurate particulars relate to furnishing of factually incorrect details and the information about the income - The assesse has proved that he was the resident representative at Delhi of Sri Vasari Industries Ltd. and ER Textiles Ltd. the assessee was appointed by them to do their liaison and coordination work at Delhi and also that both the companies used to deposit cash or by cheque into the savings bank account of the assessee for expenditure as directed by it - ClT(A) rightly deleted the penalty Decided against revenue.

Summary

Issues Involved:
1. Deletion of addition of Rs. 11,03,680/- as unexplained cash deposit.
2. Deletion of penalty imposed under Section 271(1)(c) amounting to Rs. 3,54,511/- for concealment of income and furnishing inaccurate particulars of income.

Issue-wise Detailed Analysis:

1. Deletion of Addition of Rs. 11,03,680/- as Unexplained Cash Deposit:

The appellant, an individual deriving income from salary and other sources, filed a return declaring an income of Rs. 1,23,236/- for the Assessment Year 2007-08. The case was processed under Section 143(1) and later selected for scrutiny. Statutory notices were issued, and the appellant responded by attending proceedings and submitting requisite details. The Assessing Officer (AO) assessed the income at Rs. 12,26,920/-, including an addition of Rs. 11,03,680/- as unexplained cash deposits.

The appellant explained that he was a resident representative for two outstation companies, Vasavi Industries Ltd. and ER Textiles Ltd., and that the cash deposits were funds transferred by these companies for expenditure on their behalf. The AO, however, concluded that the appellant failed to substantiate the source of the deposits with proper documentary evidence, leading to the addition.

The CIT(A) deleted the addition, noting that the appellant provided satisfactory explanations and confirmations from the companies regarding the cash deposits. The CIT(A) found that the deposits were supported by confirmations from the companies and matched the AIR information. The AO did not provide a clear finding or adverse material against the appellant's explanation. Consequently, the ITAT upheld the CIT(A)'s decision, stating that the AO's addition lacked material support and confirming the deletion of the addition.

2. Deletion of Penalty Imposed Under Section 271(1)(c) Amounting to Rs. 3,54,511/-:

The AO imposed a penalty of Rs. 3,54,511/- under Section 271(1)(c) for concealment of income and furnishing inaccurate particulars, based on the addition of Rs. 11,03,680/-. The appellant appealed against the penalty, and the CIT(A) allowed the appeal, stating that the appellant disclosed full facts and did not conceal income or furnish inaccurate particulars. The CIT(A) emphasized that the deposits were bona fide transactions related to the appellant's employment and responsibilities for the two companies.

The CIT(A) highlighted that the mere addition of deposits to income did not imply furnishing inaccurate particulars. The appellant provided corroborative evidence from the companies confirming the nature of the deposits. The ITAT agreed with the CIT(A), noting that the appellant disclosed all relevant facts and the AO did not prove the deposits were not bona fide. The ITAT upheld the CIT(A)'s decision, confirming the deletion of the penalty and dismissing the revenue's appeal.

Conclusion:

The ITAT dismissed both appeals by the revenue, confirming the CIT(A)'s orders. The addition of Rs. 11,03,680/- as unexplained cash deposit was deleted due to lack of material evidence against the appellant's explanation. The penalty under Section 271(1)(c) was also deleted, as the appellant had disclosed all relevant facts and did not conceal income or furnish inaccurate particulars. The ITAT upheld the CIT(A)'s reasoning and findings, leading to the dismissal of the revenue's appeals.