2018 (3) TMI 1669 - AT - Income Tax

Unexplained cash credit u/s.68 - source of the cash deposit - Held that - In the case before us the assessee is a deaf and dumb person having no source of income except for income from agricultural activities and is totally dependent on his relatives for his livelihood therefore despite the fact that the explanation of the assessee that the source of the cash deposit was out of his sole source of income from agricultural activities or the amounts received from his relatives (which had been accepted by the relatives) might not have found favour with the A.O but however it could safely be concluded that he could not had earned an amount of 6, 84, 000/- during the year under consideration. We thus are of a strong conviction that in the backdrop of the facts of the case the addition of 6, 84, 000/- even otherwise also could not have been validly made in the hands of the assessee. We thus not persuaded to subscribe to the aforesaid addition of 6, 84, 000/- in the hands of the assessee on merits therefore direct the deletion of the same on the said count also. - Addition to be deleted - decided in favour of assessee.

Issues Involved:
1. Addition of unexplained cash credit under Section 68 of the Income Tax Act, 1961.
2. Assessment of total income by the Income Tax Officer.
3. Proper examination of facts and circumstances by the Income Tax Officer.
4. Consideration of agricultural income and physical disability of the appellant.
5. Validity of the credit entry from an earlier year.
6. Requirement of proper inquiry by the Assessing Officer.
7. Failure to produce material evidence and denial of transaction genuineness.

Issue-wise Detailed Analysis:

1. Addition of Unexplained Cash Credit under Section 68:
The core issue revolved around the addition of ?6,84,000 as unexplained cash credit under Section 68. The Assessing Officer (A.O.) had treated the cash deposits in the assessee's bank account as unexplained cash credits. The assessee argued that the cash deposits were sourced from agricultural income and loans from relatives. The Tribunal found that a "bank account" cannot be construed as "books" of the assessee for the purpose of Section 68. Hence, the addition under Section 68 was not sustainable as per the judgment of the Hon'ble Bombay High Court in Commissioner of Income-tax Vs. Bhaichand N. Gandhi, which stated that a bank passbook or statement cannot be considered as a book maintained by the assessee.

2. Assessment of Total Income by the Income Tax Officer:
The A.O. had assessed the total income of ?6,86,010, including the unexplained cash credit. The Tribunal, however, found that the addition of ?6,84,000 was not justified under Section 68, thus impacting the total income assessed by the A.O.

3. Proper Examination of Facts and Circumstances by the Income Tax Officer:
The assessee contended that the A.O. did not properly examine the facts and circumstances of the case. The Tribunal noted that the A.O. had failed to disprove the assessee's claims regarding the source of the cash deposits and the dependency on family and agricultural income.

4. Consideration of Agricultural Income and Physical Disability:
The assessee, being deaf and dumb, claimed to be dependent on agricultural income and family support. The Tribunal observed that the lower authorities did not disprove the assessee's ownership of agricultural land or the claim of being dependent on family. The Tribunal emphasized that the A.O. should have considered the unique circumstances of the assessee, including his physical disability and dependency on family.

5. Validity of the Credit Entry from an Earlier Year:
The assessee argued that the credit entry was from an earlier year and should not be considered for the current assessment year. The Tribunal did not find substantial deliberation on this specific argument in the lower authorities' orders.

6. Requirement of Proper Inquiry by the Assessing Officer:
The assessee relied on various judicial precedents to argue that the A.O. should have conducted a proper inquiry before making the addition. The Tribunal agreed that the A.O. did not conduct a thorough inquiry or provide substantial evidence to disprove the assessee's explanations regarding the cash deposits.

7. Failure to Produce Material Evidence and Denial of Transaction Genuineness:
The assessee argued that the A.O. did not state that the assessee failed to produce material evidence or deny the genuineness of the transactions. The Tribunal found that the lower authorities had not provided sufficient grounds to disprove the assessee's claims or the genuineness of the transactions.

Conclusion:
The Tribunal allowed the appeal, setting aside the order of the CIT(A) and quashing the addition of ?6,84,000 made under Section 68. The Tribunal emphasized that the addition was not sustainable under Section 68 as the bank account could not be considered as "books" of the assessee. Additionally, the Tribunal highlighted the need to consider the unique circumstances of the assessee, including his physical disability and dependency on family, while making assessments. The appeal was allowed, and the addition was directed to be deleted.

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