2015 (7) TMI 638 - AT - Income Tax

Unexplained cash credit - CIT(Appeals) sustained the addition, however, the addition was made as unexplained investment u/s. 69 - Held that - The assessee has furnished confirmation letters from all the creditors. All the creditors have supported the case of assessee. A perusal of the impugned order show that there is no discussion about the loans and advances taken by the assessee and the repayment of same. Therefore, it would not be fair to treat the entire deposits in various bank accounts of the assessee as unexplained. No merit in the contentions of the assessee with regard to agricultural income. It is an undisputed fact that the assessee has disclosed agriculture income in his return of income as ₹ 1,00,000/-. The assessee in order to justify cash deposits cannot increase agriculture income in an arbitrary manner. The arguments forwarded by the assessee and the documents placed on record to support the submissions does not infuse confidence to accept the assessee s proposition. Therefore, we reject the contention of the assessee with regard to deposit of agriculture sale proceeds in the bank. CIT(A) has made addition u/s. 69 of the Act as unexplained investment. We do not concur with such findings of CIT(A). The Revenue has not been able to show any investment made by the assessee. The term investment is not defined in the Act, the expression has to be understood in the ordinary popular sense used in commercial parlance. Thus, the word investment means placement of a particular sum of money in business venture, property or any other possession acquired for future financial return or benefit. Deposit of money in saving bank account from various quarters cannot par take the character of investment. However, it can become a source of making investment. Thus we are of considered opinion that addition should not be made on entire bank deposits. The addition can be made only on unexplained credits in the bank accounts. Accordingly, we accept the alternate plea of the assessee. The file is remitted back to the Assessing Officer to decide this issue denovo. Decided partly in favour of assessee for statistical purpose.

Summary

Issues involved:
Appeal against addition of Rs. 30,17,000 as unexplained cash credit and unexplained investment u/s. 68 and 69 of the Income Tax Act, 1961 for assessment year 2008-09.

Analysis:

1. Addition of Rs. 30,17,000 as unexplained cash credit:
The assessee, a salaried employee, filed income tax return declaring income from salary and short-term capital gains. During scrutiny, the Assessing Officer noted cash deposits of Rs. 31,17,000 in various bank accounts. The assessee attributed these deposits to agricultural income and loans for property purchase. The AO accepted Rs. 1,00,000 as agricultural income and added the balance under section 68 as unexplained cash credit. The Commissioner of Income Tax (Appeals) upheld the addition under section 69. The assessee contended that the deposits were from agricultural income and loans, supported by bank statements and confirmation letters from lenders. The Tribunal observed the deposits and loans details provided by the assessee, concluding that not the entire deposits but only unexplained credits should be added. The matter was remitted to the AO for fresh consideration.

2. Treatment of agricultural income and investment:
The assessee claimed agricultural income of Rs. 6,34,093, supported by sale proceeds deposited in bank accounts. However, the Tribunal rejected the contention, upholding the disclosed agricultural income of Rs. 1,00,000. Regarding the addition under section 69 as unexplained investment, the Tribunal disagreed with the Commissioner's findings. It clarified that mere bank deposits do not constitute investment unless used for future financial returns. The Tribunal directed that only unexplained credits should be added, remanding the issue for fresh assessment.

3. Conclusion:
The Tribunal partially allowed the assessee's appeal, emphasizing that only unexplained credits should be added from bank deposits. The matter was referred back to the Assessing Officer for a fresh decision, ensuring due opportunity for the assessee. The Tribunal's decision was pronounced on July 10, 2015, in Pune.