2016 (5) TMI 270 - HC - Income Tax

Additions u/s 68 - Cash available as Stridhan with Late Smt. Saroj Gupta on her demise - Held that - It is not disputed that Late Smt. Saroj Gupta had not filed a wealth tax return in respect of her net wealth as on 31st March 2006 which would be mandatory if she possessed cash to the extent as claimed by the AO. The Assessee had sought to explain non-filing of the wealth tax return by asserting that the cash available with Late Smt. Saroj Gupta on 31st March 2006 was only 13, 31, 800/- and the remaining amount of 1.75 lacs was received by her after 1st April 2006 and before the date of her demise (that is 14th August 2006). Apart from the fact that the Assessee provided no material to substantiate the aforesaid contention it is also relevant to note that the cash was claimed to be Late Smt. Saroj Gupta s Cash of my Istridhan and thus unless invested would not increase with efflux of time. The ITAT described the explanation provided by the Assessee as fantastic . We concur with the view that the aforesaid explanation is wholly unsustainable and was rightly rejected by the ITAT. Admittedly Late Smt. Saroj Gupta had also not disclosed any cash-in-hand other than under her proprietorship concerns. The Assessee s contention that Late Smt Saroj Gupta was not required to disclose her cashin- hand is difficult to accept. It is relevant to note that a proprietorship concern does not have a separate legal identity other than its sole proprietor and an assessee carrying on business is required to maintain books of accounts necessary for his/her assessment. Be that as it may the ITAT noted that there was no evidence of Late Smt. Saroj Gupta owning and possessing any cash-in-hand and the self serving documents could not be relied upon. It is relevant to note that out of 15.06 lacs stated to have been found in the almirah of Late Smt. Saroj Gupta a sum of 5 lacs was in currency notes in the denomination of 1, 000/- and 8, 51, 500/- was in the denomination of 500/-. Clearly such currency could not have been acquired by Late Smt. Saroj Gupta as her Stridhan during the time of her marriage as currency in such denomination was not available at that time. We concur with the view of the ITAT that the entire explanation of bequest of Stridhan and discovery of currency is an elaborate subterfuge to attempt to explain the aggregate cash deposited by the Assessee in the subsequent financial year (that is Financial Year 2007-08). - Decided against revenue.

Summary

Issues:
1. Impugning an order regarding unexplained cash credit.
2. Source of cash deposits in bank accounts.
3. Explanation for cash deposits by the Assessee.
4. Interpretation of Section 68 of the Income Tax Act.
5. Acceptance of the Assessee's explanation by the ITAT.

Analysis:

1. The appeal under Section 260A of the Income Tax Act challenged an order by the ITAT regarding unexplained cash credit. The Revenue contested the deletion of an addition of ?13,01,000 made by the AO. The controversy revolved around cash deposits totaling ?13,01,012 made by the Assessee in his bank accounts during FY 2007-08, sourced from a bequest from his deceased mother.

2. The Assessee, a Chartered Accountant, declared an income of ?1,33,240/- for AY 2008-09, explaining the cash as inheritance from his mother. The AO questioned the explanation due to lack of supporting documents like wealth tax returns. The Assessee relied on an unregistered Will and inventory of assets post the mother's demise to justify the cash deposits.

3. The ITAT reversed the CIT(A)'s decision, citing discrepancies in the Assessee's explanation. It noted the executor's delayed opening of the almirah and the currency denominations found, questioning the authenticity of the bequest. The ITAT deemed the entire scenario a subterfuge to explain the cash deposits.

4. The judgment referred to Section 68 of the Act, emphasizing the Assessee's obligation to provide a satisfactory explanation for credited sums. The ITAT's rejection of the Assessee's explanation was based on the lack of substantiating evidence and inconsistencies in the narrative.

5. The ITAT's decision to dismiss the Assessee's appeal was supported by various factors, including the executor's actions, lack of evidence of the deceased's cash holdings, and the unconvincing nature of the Assessee's claims. The judgment concluded that no substantial question of law arose, upholding the ITAT's decision and imposing costs on the Assessee.