2015 (10) TMI 302 - AT - Income Tax

Unexplained cash credit u/s 68 - proceedings u/s. 144 - CIT(A) deleted part addition - Held that - Out of the amount of ₹ 34,52,500 being the cash deposits into bank account, the assessee was able to establish the sources for ₹ 33,58,000 only. The assessee had explained that the cash receipts towards the contract amounts from the contractor for the year was only ₹ 33,58,000 and hence balance of ₹ 94,500 was left unexplained. The CIT(A) has rightly held that the amount of ₹ 33,58,000 which have been explained as cash receipts towards contract payment is to be deleted. We find no infirmity in the order of the CIT(A) on this count. Retention of addition of ₹ 94,500 made by the AO, the CIT(A) has rightly held that u/s. 68 addition can only be made when the assessee fails to explain the cash credit in the books of account maintained by the assessee and in this case the assessee has failed to explain the cash credit for an amount of ₹ 94,500. Hence, the same has been confirmed by the CIT(A) and we see no reason to hold a different view.

Summary

Issues:
Assessment of unexplained cash deposits in bank account under section 68 of the Income-tax Act, 1961.

Detailed Analysis:

1. Background and Assessment by AO:
The appeal involved the Department and the assessee against the CIT(A)'s order for the assessment year 2009-10. The AO treated cash deposits of Rs. 34,52,500 in the assessee's bank account as unexplained income due to lack of details and sources for the cash deposits, under section 144 of the Income-tax Act, 1961.

2. Assessee's Submission and AO's Observations:
During the appellate proceedings, the assessee contended that the cash deposits were from gross contract receipts, including a cash receipt of Rs. 33,58,000 from the main contractor. The AO, in the remand report, noted the absence of evidence regarding the nature of transactions and the failure to produce necessary documentation or witnesses.

3. CIT(A)'s Decision:
The CIT(A) found the sub-contract agreement genuine and confirmed the inclusion of Rs. 33,58,000 cash payment in the total contract receipts. Despite the absence of the main contractor, the CIT(A) reasoned that the cash deposits were explained by the contract payments and the assessee's compliance with Sec. 68. However, a balance of Rs. 94,500 remained unexplained.

4. Cross Objections and Grounds of Appeal:
The assessee filed cross objections challenging the addition of Rs. 94,500 and interest under sections 234B and 234C. The Department appealed on grounds related to the explanation of cash deposits and TDS requirements.

5. ITAT Judgment:
The ITAT dismissed the Department's appeal, upholding the deletion of Rs. 33,58,000 as explained cash receipts. The addition of Rs. 94,500 as unexplained cash credit was confirmed, as the assessee failed to justify this amount. The issue of interest under sections 234B and 234C was remanded to the Assessing Officer for further examination.

In conclusion, the ITAT dismissed the Departmental appeal, partly allowed the assessee's cross objection, and remanded the interest issue for reconsideration. The judgment highlighted the importance of substantiating cash deposits and complying with tax regulations to avoid additions as unexplained income.