2011 (2) TMI 1590 - AT - Income Tax

Summary

Issues involved:
The issues involved in this case are (1) deletion of addition of cash deposits u/s 68 of the Income Tax Act, 1961, (2) sufficiency of evidence provided by the assessee to explain the source of cash deposits, (3) burden of proof on the assessee to explain the source of cash deposits, and (4) consideration of additional evidence by the CIT(A) in deleting the addition.

Deletion of addition of cash deposits u/s 68:
The appeal was filed by the revenue against the order of the ld. CIT(A) deleting the addition of Rs. 8,64,000 made by the AO u/s 68 of the Income Tax Act, 1961. The assessee explained that the amount was withdrawn for renovation work and subsequently deposited back into the bank account. The CIT(A) found that the AO lacked specific evidence to challenge the cash flow statement and held that the unsubstantiated observation by the AO could not change the nature of the cash deposit. Therefore, the CIT(A) deleted the addition, which the revenue challenged in appeal.

Sufficiency of evidence provided by the assessee:
The assessee submitted that a portion of the withdrawn amount was advanced to a contractor for renovation work, and the contractor refunded the amount back to the assessee, which was then deposited in the bank account. An affidavit from the contractor supported this claim. The CIT(A) observed that the source of the deposit was explained by the assessee and that the AO did not provide any alternative explanation or evidence to contradict this. The Tribunal found no infirmity in the CIT(A)'s decision to delete the addition based on the explanation provided by the assessee.

Burden of proof on the assessee:
The revenue argued that the assessee failed to satisfactorily explain the source of the cash deposits, as required by judgments of the Hon'ble Supreme Court. However, the CIT(A) considered the evidence provided by the assessee, including the affidavit from the contractor, and concluded that the source of the deposit was adequately explained. The Tribunal upheld the CIT(A)'s decision, emphasizing that the assessee had successfully clarified the origin of the deposited amount.

Consideration of additional evidence by CIT(A):
The Tribunal noted a contradiction between the assessment order and the CIT(A)'s decision regarding the contractor's involvement in the renovation work. Despite this, the Tribunal found that the CIT(A) had not relied on any additional evidence in deleting the addition. The Tribunal concluded that the CIT(A) correctly assessed the case based on the facts presented during the assessment proceedings. Consequently, the Tribunal dismissed the revenue's appeal, affirming the deletion of the addition by the CIT(A).