2015 (12) TMI 355 - AT - Income Tax

Unexplained source of cash deposit in bank and money used for purchase of FDR - Held that - The surplus of cash withdrawal from bank during financial year 97-98 over cash deposit in bank in that year, amounts to ₹ 13,59,000/- out of cash in hand shown by the assessee as on 01/04/98 at ₹ 14,16,946/-. The difference being excess opening balance of cash in hand as on 01/04/98 over and above extra cash withdrawal from bank during financial year 97-98 ₹ 13.59 Lacs was only ₹ 57,946/-. In our considered opinion, this much cash in hand is very much possible in the beginning of F.Y. 1997 98 for a lady who was 63 years old during the relevant time. Since the excess of cash withdrawal over and above cash deposit in the bank during financial year 97-98 is supported by independent evidence being Bank Account, it cannot be said that this cash was not available with the assessee during assessment year 97-98 and therefore, even if the assessee is not in a position to explain the source of such cash in hand or in bank during financial year 97-98, addition may be made as per law in assessment year 98-99 but the same cannot be considered for making any addition in assessment year 99-2000 and the cash in hand shown by the assessee in present year over and above the surplus of cash withdrawal over cash deposit in bank of ₹ 57,946/- deserves to be accepted being cash in hand with this lady of 63 years old at the beginning of F.Y. 1997 98 and therefore,no part of addition made by the A.O. and confirmed by CIT(A) including the enhancement by him is sustainable. We, therefore, delete the same. - Decided in favour of assessee.

Summary

Issues Involved:
1. Enhancement of the assessee's income by Rs. 10,30,946/- by the CIT(A).
2. Treatment of the opening balance of cash in hand on 01/04/1998 as income of the assessee.
3. Justification and legality of the entire addition made.

Detailed Analysis:

1. Enhancement of the assessee's income by Rs. 10,30,946/- by the CIT(A):
The CIT(A) enhanced the income of the assessee by Rs. 10,30,946/-, confirming an addition of Rs. 14,16,946/- in the hands of the assessee. The enhancement was based on the finding that the assessee could not explain the source of the opening cash balance as on 01/04/1998. The CIT(A) concluded that the entire opening balance was unexplained and treated it as the income of the assessee for the assessment year 1999-2000.

2. Treatment of the opening balance of cash in hand on 01/04/1998 as income of the assessee:
The assessee argued that the opening balance of Rs. 14,16,946/- on 01/04/1998 was the closing balance as on 31/03/1998. The cash book for the period 01/04/1997 to 31/03/1998 showed substantial withdrawals from the bank, which were claimed to be the source of the opening balance. The assessee provided evidence of withdrawals from the Punjab National Bank, Rajendra Nagar Branch, amounting to Rs. 15,98,000/- during the financial year 1997-98. The assessee contended that these withdrawals justified the cash in hand as on 01/04/1998.

3. Justification and legality of the entire addition made:
The assessee argued that the addition made by the AO and enhanced by the CIT(A) was unjustified and illegal. The assessee, a physically handicapped lady born in 1945, had inherited liquid assets from her father and had no major investments. Her savings were held in cash or bank accounts. The assessee's explanation for the opening balance was supported by bank statements showing substantial withdrawals during the financial year 1997-98. The assessee also cited several case laws to support her contention that the opening balance from a previous year could not be treated as unexplained income for the current year.

Tribunal's Findings:
The Tribunal considered the rival submissions and found that the addition made by the AO of Rs. 5,87,693/- was based on unexplained cash deposits in the bank and money used for FDR purchases. The CIT(A) enhanced the addition by Rs. 10,30,946/- on the grounds that the assessee could not explain the opening cash balance of Rs. 14,16,946/- as on 01/04/1998. The Tribunal noted that the assessee had provided evidence of substantial cash withdrawals from the bank during the financial year 1997-98, which supported the opening balance. The Tribunal concluded that the cash in hand as on 01/04/1998 was justified by the independent evidence of bank withdrawals, and therefore, no part of the addition made by the AO and enhanced by the CIT(A) was sustainable. The Tribunal deleted the entire addition.

Conclusion:
The appeal of the assessee was allowed, and the addition of Rs. 14,16,946/- made by the AO and enhanced by the CIT(A) was deleted. The Tribunal accepted the assessee's explanation for the opening cash balance as on 01/04/1998, supported by evidence of bank withdrawals during the financial year 1997-98.