2015 (10) TMI 2845 - AT - Income Tax

Unexplained cash deposits in bank account u/s.68 - no narration of cash deposit and withdrawal has been given - assessee submitted that the authorities below failed to appreciate the fact that the assessee had been withdrawing and depositing the amount with ICICI Bank - HELD THAT - We find that both the authorities below have failed to appreciate the fact that on various occasions, the assessee has withdrawn from the same account and deposited in the bank after a week s time. In our considered view, this amount should not have been added to the total income of the assessee. It is settled position of law that only unexplained deposit could be subjected to tax. If an assessee is able to demonstrate that he had deposited the amount earlier withdrawn from the same account, in that case, the AO would not be justified to subject both the credits to tax. Assessee in respect of other deposits could not give any satisfactory explanation, therefore we hereby direct the AO to make addition on the basis of the peak-credits. AO is directed to compute the peak-credits and make addition accordingly. Ground raised in the assessee s appeal is allowed for statistical purposes.

Summary

Issues Involved:
Appeal against addition of unexplained cash deposits in bank account upheld by CIT(A) for AY 2008-09.

Analysis:

Issue 1:
The Assessee challenged the addition of Rs.18.25 lakh as unexplained cash deposits in the bank account made by the Assessing Officer (AO) and upheld by the Commissioner of Income Tax (Appeals) [CIT(A)]. The Assessee contended that the addition was illegal, unlawful, and against natural justice principles. The Assessee argued that the CIT(A) did not consider their submissions and evidence properly, and should have allowed the submission of additional evidence like a cash book. The prayer was for deletion of the addition.

Issue 2:
The main contention was the confirmation of the unexplained cash deposits of Rs.18.25 lakh in the ICICI Bank account by the CIT(A). The Assessee argued that there were withdrawals and deposits made by them in the bank account, indicating a nexus between the transactions. The Assessee pointed out specific instances of withdrawals and subsequent deposits to support their claim that not the entire amount should be added to their income. The argument was that the peak-credits should be considered instead of the total cash deposits.

Issue 3:
The Assessee raised concerns about the rejection of the copy of the cash book and urged for a restriction of the addition to the extent of peak credit. The argument was that the AO should not have added the entire cash deposit amount without considering the withdrawals made by the Assessee from the same account.

The Tribunal found that the AO and the CIT(A) failed to appreciate that the Assessee had withdrawn and deposited amounts from the same bank account on various occasions. It was established that the Assessee had withdrawn cash and subsequently deposited it back into the account, indicating a clear source for the deposits. The Tribunal directed the AO to compute the peak-credits and make additions accordingly, emphasizing that only unexplained deposits should be subjected to tax. The orders of the lower authorities were set aside, and the issue was remanded to the AO for a fresh decision based on the directions provided.

In conclusion, the appeal of the Assessee was allowed for statistical purposes, highlighting the importance of establishing a clear nexus between withdrawals and deposits to determine unexplained cash deposits for taxation purposes.