2017 (4) TMI 1012 - AT - Income Tax

Unexplained source of the cash deposits - Held that - The initial stand of the assessee was that deposits made in M/s. City Union Bank were out of the withdrawals made from the company for purchase of the property. If what Mr. Ganapathy stated is true, the advance of ₹ 30,00,000/- given by him to Shri. Dhanasekar, on behalf of the company would have found a place in the assets of the company as on 31.03.2005. The advance paid for acquiring asset, whether stock in trade or not, has to appear in balance sheet and if it does not appear it only means that there was no such advance given by the company. Just because assessee produced Mr. Ganapathy would not convert whatever he stated as true. Ld. Assessing Officer also specifically noted that Mr. Ganapathy had given vague answers regarding date of receipt of advance back from Mr. Dhanasekar and payment of the money back to assessee or M/s. Tamil Nadu Air Travels Pvt Ltd. Nothing of what has been stated by Mr. Ganapathy was supported by any evidence. The balance sheet of M/s. Tamil Nadu Air Travels Pvt Ltd did not reflect any transaction which assessee claimed. Assessee was unable to substantiate the source of the cash deposits made by him in his bank account.- Decided against assessee.

Summary

Issues:
1. Addition of ?25,73,500/- confirmed by Commissioner of Income Tax (Appeals).
2. Addition of ?31,565/- for differential interest.

Analysis:
1. The appellant, a director of a company, deposited ?25,73,500/- in his personal bank account. The Assessing Officer issued a notice under section 148 of the Income Tax Act as the appellant had not filed an income tax return. The appellant explained that the deposits were made from drawings of the company, supported by relevant documents. However, the company's bank account did not show such withdrawals. The appellant presented a letter from a real estate broker stating that the money deposited was returned to him after a failed property purchase deal. The Assessing Officer doubted the reliability of the evidence provided by the broker and found discrepancies in the balance sheets of the company. The Commissioner of Income Tax (Appeals) upheld the additions made by the Assessing Officer, stating that the appellant failed to prove the source of the cash deposits adequately.

2. The appellant also disputed an addition of ?31,565/- for differential interest. However, no substantial arguments were presented on this issue. The Assessing Officer noted a variance between the interest admitted in the income tax return and the actual interest received by the appellant. The Commissioner of Income Tax (Appeals) upheld this addition as well, as the appellant did not provide sufficient justification for the difference in interest amounts.

In the appeal before the Appellate Tribunal, the authorized representative reiterated the arguments made before the Assessing Officer, emphasizing the confirmation of transactions by the broker. The Tribunal, after considering the contentions of both parties and reviewing the evidence, found that the appellant failed to substantiate the source of the cash deposits. The Tribunal noted discrepancies in the statements provided by the broker and the lack of supporting evidence for the transactions claimed by the appellant. Consequently, the Tribunal upheld the orders of the lower authorities, dismissing the appeal of the appellant.

In conclusion, the Appellate Tribunal upheld the additions made by the Commissioner of Income Tax (Appeals) regarding the unexplained cash deposits and differential interest, as the appellant could not adequately prove the sources of these amounts. The Tribunal found the explanations provided by the appellant to be insufficient and lacking in supporting evidence, leading to the dismissal of the appeal.