2016 (4) TMI 695 - AT - Income Tax

Additions u/s 69A - Held that - In the present case on hand, though assessee filed cash flow statement and also affidavit from his wife affirming having income from tuitions and interest, he failed to furnish cogent evidences to prove the genuineness of the transactions. The assessee claimed to have savings from his salary income and agricultural income. His claim that his life time savings was kept in the form of cash and deposited into bank account is quite opposite to the human probability. The explanations offered by the assessee to prove the sources for cash deposit is purely a guess work, but not supported by any cogent materials. On perusal of documents filed by the assessee in support of sources for cash deposits, i.e. his cash inflow, cash outflow and savings and mode of savings and then applied to the test of human probability, it fails to pass the test of human probability. When assessee makes a claim and which is not supported by any evidences or evidences are inadequate, then human probability test is one of the important tests laid down by the highest court of India in order to check the genuineness of the transactions. For example, a person whose annual income is ₹ 20,000/- with which he runs his living show claims that he purchased a diamond necklace worth ₹ 2 lakhs and informed the A.O. that he has bought it from out of his savings. Now when we apply the human probability test, we can easily infer that the assessee cannot have bought that necklace out of his income. In the present case on hand, though assessee claims that he had sources for cash deposits, the sources claimed and corresponding evidences fails to pass the human probability test. The CIT(A) after carefully examined the evidences filed by the assessee has elaborately discussed each and every item of source claimed by the assessee and after considering the facts and circumstances, allowed relief of ₹ 3,00,000/- and confirmed the addition to the extent of ₹ 36,04,000/-. We do not see any error or infirmity in the order passed by the CIT(A). Hence, we inclined to upheld the order of CIT(A) - Decided against assessee

Issues Involved:

1. Legitimacy of cash deposits in the assessee's bank account.
2. Adequacy of evidence provided to substantiate the sources of cash deposits.
3. Application of human probability test to the claimed sources of cash deposits.
4. Appropriateness of CIT(A)'s partial relief to the assessee.

Issue-wise Detailed Analysis:

1. Legitimacy of Cash Deposits in the Assessee's Bank Account:

The primary issue in this case was the legitimacy of cash deposits amounting to Rs. 40,04,000 in the assessee's savings bank account at Corporation Bank. The assessee claimed these deposits were sourced from past savings, his wife's income, and cash gifts received on the occasion of his son's marriage. However, the Assessing Officer (A.O.) rejected these explanations, citing a lack of cogent evidence to substantiate the sources of these deposits.

2. Adequacy of Evidence Provided to Substantiate the Sources of Cash Deposits:

The assessee provided a detailed cash flow statement, affidavits, and a list of gifts received from friends and relatives. Despite these submissions, the A.O. found the evidence insufficient. The CIT(A) also held that the assessee failed to prove the sources for cash credits with any cogent material evidence. The A.O. particularly noted the absence of reliable documentary evidence to establish the legitimacy of the claimed sources, including the sale proceeds of Sarugudu Thota and the wife's income from tuition classes.

3. Application of Human Probability Test to the Claimed Sources of Cash Deposits:

The judgment emphasized the importance of the human probability test, a principle laid down by the highest court of India. The test evaluates the plausibility of the claimed sources based on normal human behavior and circumstances. The A.O. and CIT(A.) both found that the assessee's explanations did not pass this test. For instance, the claim that the assessee's lifetime savings were kept in cash and deposited in the bank during the year under consideration was deemed improbable. Similarly, the wife's claimed savings from tuition income and gifts from her father and brother were not substantiated with adequate evidence.

4. Appropriateness of CIT(A)'s Partial Relief to the Assessee:

The CIT(A) considered the assessee's social status and the fact that his son's marriage took place during the financial year under consideration. Consequently, the CIT(A) accepted Rs. 3,00,000 out of the total claimed gifts of Rs. 8,21,798 as legitimate and allowed this partial relief. However, the remaining addition of Rs. 36,04,000 was confirmed. The tribunal upheld this decision, finding no error or infirmity in the CIT(A)'s order. The tribunal also dismissed the stay application for the outstanding demand as the appeal itself was dismissed.

Conclusion:

The tribunal concluded that the assessee failed to provide sufficient and credible evidence to substantiate the sources of the cash deposits. The explanations offered did not pass the human probability test, and the documentary evidence presented was inadequate. Consequently, the tribunal upheld the CIT(A)'s order, confirming the addition of Rs. 36,04,000 and dismissing the appeal and the stay application filed by the assessee.

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