2017 (6) TMI 1043 - AT - Income Tax

Addition made u/s 69A - assessee had made cash deposits in Axis Bank - Held that - In the current year, the assessee had disclosed net agricultural income of ₹ 3,85,000/-. Even in the subsequent assessment year, a perusal of the return of income shows that the assessee had declared net agricultural income of ₹ 3,70,000/-. The payments made by M/s. A.N. Rubbers aggregating to ₹ 4,78,055/- match with the deposits made by the assessee in the Axis Bank. Since the assessee had disclosed net agricultural income of ₹ 3,85,000/- in the current AY which has not been disputed by the Assessing Officer, no hesitation to hold that the claim of the assessee that the deposits made on 09/04/2008, 18/10/2008, 06/11/2008, 09/12/2008 and 25/03/2009respectively has been properly explained. Hence delete the addition made amounting to ₹ 4,51,000/-. It is ordered accordingly. For the balance ₹ 10,05,000/- added u/s. 69A, it is claimed that the source of funds are deposits made out of withdrawals from the assessee s OD account and the margin loan money received from District Industries Centre, Trivandrum. In the interest of justice and equity, one more opportunity needs to be granted to the assessee to explain the source of cash deposits with Axis Bank. Appeal of the assessee is partly allowed for statistical purposes.

Summary

Issues:
Whether the CIT(A) was justified in confirming the assessment order regarding the addition made under section 69A of the I.T. Act.

Analysis:
The appeal before the ITAT Cochin was against the CIT(A)'s order dated 08-02-2017 concerning the assessment year 2009-10. The main issue was the confirmation of the assessment order regarding the addition made under section 69A of the I.T. Act. The assessee, engaged in rubber manufacturing, had made cash deposits in an Axis Bank account during the relevant year. The Assessing Officer added ?14,56,000 as income assessable under section 69A, except for ?1,25,000 credited. The CIT(A) upheld this decision, leading to the appeal.

The assessee contended that the deposits were related to agricultural income and other sources, supported by detailed submissions and documents. The ITAT considered the specific dates and amounts of cash deposits, along with their claimed sources. The ITAT found that deposits on certain dates were adequately explained by agricultural income and other sources, totaling ?4,51,000. These deposits were supported by evidence like income and expenditure statements and a confirmation letter from a buyer of rubber latex and scrap.

Regarding the remaining ?10,05,000 added under section 69A, the ITAT granted the assessee another opportunity to explain the source of these deposits from the OD account and margin loan. The ITAT emphasized the need for a correlation between cash withdrawals and deposits. The Assessing Officer was directed to reexamine this amount after the assessee provided necessary evidence and cooperation.

Conclusively, the ITAT partially allowed the appeal for statistical purposes. The decision was pronounced openly on 26th-04-2017. The judgment highlighted the importance of establishing a clear link between cash deposits and their sources, especially in cases involving additions under section 69A of the Income Tax Act.