2017 (11) TMI 1741 - AT - Income Tax

Addition u/s 69 - admission of addition evidence to prove the source of cash deposited in saving bank account - peak credit of the cash deposits - Held that - The appellant was unwilling to give any information regarding the taxability of such accruals in the hands of the appellant s mother during the relevant period. Under these circumstances the appellant was denied the opportunity of adducing the new evidence and the request was overwhelmingly rejected. As further observed by the CIT(A) that the appellant could not explain the source of cash deposits in the bank account even in the preceding assessment year which was confirmed in first appeal. From the consideration of the observation of the Ld. CIT(A) for rejecting the request of assessee for admission of additional evidence we are of the view that he has passed well reasoned and logical order hence does not suffer from any illegality perversity and impropriety. The alleged agreement to sale on which the assessee relying is undisputedly unregistered therefore it has no efficacy in the eyes of law and obviously no transfer can be said to have been taken place under the said document therefore the same cannot be taken into consideration for establishing the claim. Under the Income Tax Act specifically sub-clause (vi of Sec.2 (47) of the I.T. Act and finally no profit or gain can be taken into consideration from the unregistered agreement to sale. The case relied upon by the assessee are altogether dissimilar to the instant case and hence not applicable to the case in hands hence the ground Nos.1 to 3 stands dismissed. Addition on account of net profit @5% on the total amount of cash deposits in the saving bank account of the assessee - Held that - From the order passed by the CIT(A) we realized that although the assessee has raised the ground before the Ld. CIT(A) with regard to the ground No.4 herein however from the order passed by the Ld. CIT(A) it appears that the said issue was taken by the assessee in the grounds of appeal before the Ld. CIT(A) however neither specific agitation made by the Assessee nor adjudicated by the Ld. CIT(A) therefore we feel it appropriate to remand back the issue raised in ground No.4 of instant appeal to the file of Ld. CIT(A) to adjudicate the same on merit by offering proper and reasonable opportunity of being heard.

Summary

Issues Involved:
1. Dismissal of appeal and confirmation of income assessment.
2. Rejection of additional evidence to prove the source of cash deposits.
3. Confirmation of addition based on peak credit of cash deposits.
4. Confirmation of addition based on estimated net profit from cash deposits.
5. Applicability of Section 69 of the IT Act, 1961.

Issue-wise Detailed Analysis:

1. Dismissal of Appeal and Confirmation of Income Assessment:
The assessee filed an appeal against the order dated 26.08.2015 by the CIT(A), Bathinda, which confirmed the income assessment at Rs. 16,74,550/-. The assessee's return of income was initially filed at Rs. 1,43,850/-. Due to non-compliance with statutory notices, the Assessing Officer (AO) completed the assessment under Section 144 of the IT Act, determining the income based on best judgment.

2. Rejection of Additional Evidence to Prove the Source of Cash Deposits:
The CIT(A) rejected the assessee's request to admit additional evidence, which included documents related to the sale of property by the assessee's mother. The CIT(A) noted that the assessee failed to comply with multiple notices and reminders during the assessment proceedings. The explanation for the time lag between the sale of property in January 2008 and the cash deposits in the financial year 2010-11 was deemed implausible.

3. Confirmation of Addition Based on Peak Credit of Cash Deposits:
The AO found that the assessee maintained two bank accounts and deposited a total of Rs. 35,31,000/- without explaining the source. The peak credit amount of Rs. 14,73,000/- was added as income. The CIT(A) upheld this addition, noting that the assessee did not provide a satisfactory explanation for the cash deposits even during the appellate proceedings.

4. Confirmation of Addition Based on Estimated Net Profit from Cash Deposits:
The AO estimated a net profit of 5% on the total cash deposits, resulting in an additional income of Rs. 57,700/-. The CIT(A) confirmed this addition. The assessee argued that no further addition should be made if a net profit rate is applied. However, the CIT(A) found the AO's assumptions justified due to the lack of cooperation from the assessee.

5. Applicability of Section 69 of the IT Act, 1961:
The assessee raised an additional ground challenging the applicability of Section 69, arguing that it requires the maintenance of books of accounts and investments outside the books. The Tribunal referred to a previous decision, clarifying that Section 69 does not mandate maintaining books of accounts. The Tribunal dismissed the additional ground, concluding that the AO's application of Section 69 was appropriate.

Conclusion:
The Tribunal upheld the CIT(A)'s order, dismissing the assessee's appeal on most grounds. The appeal was partly allowed for statistical purposes, with the issue of net profit estimation (ground No. 4) remanded back to the CIT(A) for adjudication on merit. The Tribunal emphasized the legal requirement for explanations regarding unexplained cash deposits and the applicability of Section 69, reinforcing the AO's findings and the CIT(A)'s conclusions.