2017 (3) TMI 325 - AT - Income Tax

Unexplained source of cash deposit - Held that - Assessee was dealing in its whole business on cash basis. The assessee has filed profit and loss account and balance sheet of the business which has been accepted by the AO as is evident from the assessment order. The assessee does not maintain any current account and deposits all the receipts in the saving bank account. In this case the assessee has advanced fresh loan of ₹ 9,50,000 to three parties and assessee s source of deposit is mainly the withdrawals of ₹ 1,66,500/- and collection from Debtors of ₹ 10,87,362/- from his business, as is evident from the fact that opening debtors is of ₹ 2,79,166/- and total sales made during the year is ₹ 9,46,850/-. Out of this during the year assessee received amount of ₹ 10,87,362/- in cash and ₹ 1,33,221/- vide cheques. Thus find considerable cogency in the assessee s contention that the cash received and withdrawals after making payment for expenses and creditors deposited in to the bank account and the same was used to advance the loan to the said parties. Hence, it is crystal clear that the payments are totally out of assessee s business and the results have been accepted by the AO, as the business income has been assessed at ₹ 1,51,580/-, hence, the source of deposit has been explained by the Assessee to the AO and addition made on this account is not sustainable in the eyes of law, hence, the same needs to be deleted. - Decided in favour of assessee

Summary

Issues:
1. Validity of the order passed by Ld. CIT(A).
2. Legality of the initiation of proceedings under Section 147 read with Section 148.
3. Validity of the reassessment proceedings initiated by the AO.
4. Addition of ?9,50,000 on account of cash deposit in bank.
5. Consideration of explanations and evidences by the Ld. CIT(A).

Analysis:
1. The Assessee challenged the order of the Ld. CIT(A) for being legally and factually flawed. The Appellate Tribunal noted the grounds raised by the Assessee and proceeded to analyze each issue in detail.

2. The initiation of proceedings under Section 147, in conjunction with Section 148, was contested by the Assessee. The Tribunal examined whether the conditions and procedures under the statute were duly satisfied and complied with, ultimately assessing the validity of the initiation of such proceedings.

3. The Tribunal scrutinized the legality of the reassessment proceedings initiated by the Assessing Officer, focusing on the adequacy and legality of the reasons recorded for issuing the notice under Section 148. The Tribunal assessed whether the reasons were legally sound and based on factual evidence.

4. The addition of ?9,50,000 on account of cash deposit in the bank was a pivotal issue. The Tribunal evaluated the grounds for this addition, considering the explanations and evidences provided by the Assessee. The Tribunal analyzed whether the Ld. CIT(A) erred in confirming this addition and assessed the validity of the reasons for such addition.

5. The Tribunal considered the Assessee's contentions regarding the addition of ?9,50,000, focusing on the explanations and evidences presented. The Tribunal reviewed the Ld. CIT(A)'s decision to confirm the addition, assessing the validity of rejecting the Assessee's explanations and evidences. The Tribunal's analysis encompassed the legal and factual aspects of the decision-making process.

In conclusion, the Appellate Tribunal, after thorough analysis and consideration of legal precedents, allowed the Assessee's appeal, deleting the disputed addition of ?9,50,000. The Tribunal's decision was based on the findings that the source of the deposit had been adequately explained by the Assessee, rendering the addition unsustainable in the eyes of the law. The Tribunal's detailed examination of the issues highlighted the importance of legal compliance and factual justifications in assessment proceedings.