2019 (2) TMI 1794 - AT - Income Tax

Unexplained cash deposit and unproved expenditure on account of stamp duty, registration fee etc. - HELD THAT - It is not in dispute that during the course of search, two cash vouchers dated 05.04.2010 in the name of Mr. Sachin Gandhi Mrs. Meera Gandhi for payment of ₹ 10 lakhs each were found at the residential premises of the assessee, which were towards the purchase of land at Nashik. During the course of search, statement of assessee was recorded wherein the source of payment of ₹ 20 lakhs was stated to be withdrawal of the amount from his ICICI Bank account. We find that the contention of the assessee of having taken a demand draft from the Bank, getting it cancelled and withdrawing of cash from the bank is reflected in his bank account with ICICI Bank. In the statement of Shri Sachin C. Gandhi, had also accepted the payment of cash to be a stop gap arrangement and refundable on receipt of the agreed amount by way of cheque. Submissions of the assessee has not been found to be false on the basis of any corroborative evidences. Thus when the assessee in the statement recorded at the time of search had explained the source of withdrawal of cash from his bank account and subsequently, the depositing in his bank account coupled with the confirmations of Mr. and Mrs. Gandhi, we are of the view that assessee has fully explained the source of cash deposits. No additions on account of unexplained cash deposit and unproved expenditure on account of stamp duty can be made in the present case. We therefore direct its deletion. Grounds of the assessee are allowed.

Summary

Issues:
Addition of cash deposits in ICICI Bank account and payment of stamp duty & registration fees.

Analysis:
The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2011-12. The primary issue revolved around the addition of ?17.50 lakhs and ?2.50 lakhs on account of cash deposits in the ICICI Bank account and payment of stamp duty & registration fees, respectively. The Assessing Officer (AO) noted discrepancies in the cash vouchers found during a search and seizure action, leading to doubts about the nature of the transactions. The AO concluded that the assessee failed to prove the source of cash deposits and the claimed expenditure, treating them as "unexplained cash credit" and "unproved expenditure," respectively.

The Commissioner of Income Tax (Appeals) upheld the AO's order, stating that the explanations provided by the assessee were not credible and lacked supporting evidence. The CIT(A) dismissed the grounds raised by the appellant, emphasizing that the cash payments were over and above the recorded transaction value, and the source of cash deposits remained unexplained. The appellant's claim of a stop gap arrangement and cash refunds by the vendors was considered an afterthought.

Upon further appeal, the Income Tax Appellate Tribunal (ITAT) reviewed the case and found merit in the assessee's submissions. The ITAT observed that the assessee had adequately explained the source of cash deposits and the subsequent transactions. The tribunal noted that the statements of the vendors supported the appellant's version of events, and the bank statements corroborated the withdrawal and deposit of funds. Consequently, the ITAT directed the deletion of the additions made by the AO, ruling in favor of the assessee.

In conclusion, the ITAT allowed the appeal of the assessee, overturning the previous decisions and ordering the deletion of the disputed amounts. The tribunal found that the assessee had satisfactorily clarified the source of cash deposits and demonstrated the legitimacy of the transactions, leading to a favorable judgment in the case.