2015 (7) TMI 943 - AT - Income Tax

Addition u/s 68 - Production of cash book - Verification by AO - Onus to prove - Held that - assessee had indeed produced a cash book before the AO. - Once assessee produced a cash book, the onus was on the assessee to prove the entries therein. If it was unable to do so, AO could certainly invoke Section 68, even otherwise AO can invoke Section 69, if source of investment is not properly explained. Assessee cannot wriggle out of its obligation under law, by citing a reason that books of accounts were prepared under the instruction of the AO. No doubt, assessee had returned its interest income under the head Other sources . But application of Section 68 and Section 69 are not restricted to business income. It can encompass any type of income, as the facts may call for. Confirmation filed by the assessee at pages 22 to 36, did carry the address of the persons from whom it had received cash. None of these persons were examined by the lower authorities. Further, accumulation of cash in cash-book perse cannot be a reason for disbelieving the source of a deposit in Bank. An assessee might have myriad of reason for withdrawing cash from bank or keeping cash with him. Unless the distance of time is such as to make it unbelievable, in our opinion explanation of source should not be brushed aside. We are therefore, of the opinion, that rules of justice require a verification of the confirmation filed by the assessee, by the AO, by issuing proper summons. If the parties do not attend the summons on if the assessee fails to produce them, AO can take an adverse view and make an addition. For the limited purpose of this verification, we set aside the orders of the authorities below and remit the issue of addition of ₹ 12.00 lakhs back to the file of the AO. - Decided partly in favour of assessee.

Summary

Issues:
- Addition of Rs. 12 lakhs under section 68 of the Income-tax Act, 1961 confirmed by the CIT(A).

Detailed Analysis:

Issue 1: Addition under Section 68 of the Income-tax Act
- The assessee, an HUF, declared an income of Rs. 1,79,850 as interest received on money lent to individuals. The AO noted cash deposits in the bank account of the assessee and sought explanations for the source of these deposits.
- The assessee provided explanations, stating that the cash deposits were made from money withdrawn from the bank and cash on hand, which was lent to various persons and later deposited back into the bank to clear a loan.
- The AO did not accept the explanation and made an addition of Rs. 12 lakhs under section 68 of the Act, as he found no valid proof for the source of the cash deposits.
- In the appeal before the CIT(A), the assessee argued that the cash deposits were receipts from debtors to whom loans were advanced earlier, and the cash book reflected an accumulation of cash balance used for the deposits.
- However, the CIT(A) upheld the addition, stating that the confirmations filed by the assessee lacked complete particulars and signatures, and the flow of withdrawals from the bank was illogical for a moneylending business.
- The appellate tribunal found that the assessee had produced a cash book before the AO, and various confirmations from debtors supported the cash deposits. The tribunal held that the onus was on the assessee to prove the entries in the cash book, and if unable to do so, Section 68 or Section 69 could be invoked.
- The tribunal emphasized the need to verify the confirmations filed by the assessee by issuing proper summons to the debtors, setting aside the previous orders and remitting the issue back to the AO for verification.

In conclusion, the appellate tribunal partially allowed the appeal for statistical purposes, emphasizing the importance of verifying the sources of cash deposits before making additions under Section 68 of the Income-tax Act.