2015 (5) TMI 921 - AT - Income Tax

Unexplained money u/s.69 - Held that - We do not find any justification in the action of the AO for rejecting the cash memo merely on the plea that these were not signed/authenticated by the recipient of the goods. In case of retail trade, there is no practice of getting the signature in sales bills. Furthermore, in case of cash sales there is no need to give full details of the buyer and the recipient of goods, insofar as assessee delivers the goods only after receipt of entire sale consideration. Since the deposit in bank account was much more than sales shown by assessee, onus is on the assessee to show the source of excess money deposited in bank account either in cash or through cheques. In the interest of justice and fairplay, we restore the appeal for assessment year 2005-06 to the file of AO for deciding afresh after giving due opportunity of hearing to the assessee. - Decided in favour of assesse for statistical purposes. Unexplained cash credit u/s 68 - Held that - credit in the bank account was on account of ₹ 119,900/- received from assessee s son Nizarali Govani whose loan confirmation was also filed. Further a sum of ₹ 3.25,000/- was transferred from saving account No.10078 with Development Credit Bank. ₹ 3,00,000/- is received from client s daughter Rozina Govani whose loan confirmation was also enclosed. However, to substantiate the claim of various deposits and withdrawals the assessee has not filed any cash-flow/fund-flow statement. From the orders of lower authorities it is not clear that documentary evidences with respect to source of funds were filed before them. Thus the addition made during the assessment year 2006-07 u/s.68 as well as on account of short term capital gains is also restored to the file the AO for deciding afresh after giving due opportunity to the assessee.- Decided in favour of assesse for statistical purposes

Issues Involved:
1. Addition of unexplained money under Section 69A for the assessment year 2005-06.
2. Addition of unexplained deposits under Section 68 for the assessment year 2006-07.
3. Addition on account of short-term capital gains for the assessment year 2006-07.

Issue-wise Detailed Analysis:

1. Addition of Unexplained Money under Section 69A for the Assessment Year 2005-06:
The Assessing Officer (AO) observed that the assessee, engaged in the wholesale business of ladies boutique items and garments, had deposited cash of Rs. 19,25,590 and cheques/transfers amounting to Rs. 5,87,500 in her bank account. The AO questioned the nature of these deposits and the payments made to Silverline Marketing, which remained unexplained as the assessee failed to provide sufficient documentary evidence or the addresses of Silverline Marketing. Consequently, the AO added Rs. 25,13,090 as unexplained money under Section 69A of the Income Tax Act.

Upon appeal, the CIT(A) confirmed the AO's addition, noting that the appellant did not disclose her business transactions with Silverline Marketing in her return of income and failed to provide supporting evidence. The CIT(A) emphasized that the appellant's explanations and documentation were insufficient to substantiate the deposits, thus upholding the addition made by the AO.

2. Addition of Unexplained Deposits under Section 68 for the Assessment Year 2006-07:
For the assessment year 2006-07, the AO added Rs. 27,86,639 under Section 68, citing unexplained deposits in various bank accounts. The deposits were claimed to be from diverse sources such as sale proceeds of a shop, encashment of FDRs, sundry debtors, and loans from family members. However, the assessee failed to provide corresponding documentary evidence or detailed explanations for these deposits.

The CIT(A) partially accepted the AO's remand report, which acknowledged Rs. 2 lakhs as proceeds from partial encashment of FDR but maintained the addition of Rs. 25,86,639 as unexplained credits. The CIT(A) found the appellant's explanations inadequate and lacking documentary support, thereby confirming the majority of the AO's additions.

3. Addition on Account of Short-term Capital Gains for the Assessment Year 2006-07:
The AO also added Rs. 16,07,157 as short-term capital gains, noting discrepancies in the appellant's balance sheet and the lack of documentary evidence for the claimed costs and expenses related to the property sold. The CIT(A) upheld this addition, emphasizing the inconsistencies in the appellant's records and the absence of proof for the claimed expenses and loans associated with the property.

Tribunal's Decision:
The Tribunal considered the appellant's contentions and the lower authorities' findings. For the assessment year 2005-06, the Tribunal noted that the AO's rejection of cash memos based on the lack of signatures and full addresses was unjustified, as such details are not customary in retail trade cash sales. However, the Tribunal acknowledged that the onus was on the assessee to explain the source of excess deposits. Therefore, the Tribunal restored the matter to the AO for fresh consideration, providing the assessee another opportunity to substantiate her claims.

For the assessment year 2006-07, the Tribunal observed that the assessee did not file a cash-flow or fund-flow statement to support her explanations for the deposits. Given the incomplete documentary evidence, the Tribunal also restored the addition under Section 68 and the short-term capital gains issue to the AO for a fresh decision after giving due opportunity to the assessee.

Conclusion:
The Tribunal allowed the appeals for statistical purposes, directing the AO to re-examine the issues for both assessment years 2005-06 and 2006-07, ensuring that the assessee is given a fair chance to present her case with appropriate evidence. The order was pronounced in the open court on 13/05/2015.

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