2017 (7) TMI 691 - AT - Income Tax

Unexplained cash credit addition u/s 68 - source of the cash deposited in the assessee s bank - Held that - On facts, the assessee, who appears to be a man of modest means, is to exhibit the build-up cash with him up to the date/s it was given to a party/s toward purchase of property, which remains unspecified. This could be from his savings which again would only be from his earnings, or earnings, and may towards its reasonability, require assessment of the necessary expenditure toward personal/household purposes, and other mandatory, proven outgoings, viz. taxes, deposits under PPF/life insurance, etc. It is this that would constitute the source. This could also be from his capital which would though have to be proved, invested in an asset, since realized to generate cash. And of which, again, there is no whisper (in the assessee s explanation). Like-wise, for the mother, who has independently advanced Rs. . 30 lacs for the purchase of property, and whose capacity therefore to do so (i.e., deposit with a third party) would require being shown. The explanation is sans any specifics nor supported by any material or contemporaneous evidence. Rather, the explanation itself raises some questions, viz. qua the particulars of the property; the documents evidencing the transaction, binding the parties to the contract; was the transaction jointly with the mother and why, as it appears, the entire of it in cash, etc. Then, again, what is the basis to say that the amount stands received back on 30.04.2008, which could not again be without evidence? Why did the mother not deposit the money in her bank account or, alternatively, why was the amount not paid back to her but deposited in the assessee s account? Again, is the explanation consistent with the assessee and his mother s balance-sheet as on 31.03.2009; the cash statement rendered being, surprisingly, only up to 04.10.2008, and not up to the end of the year? How has the sum received from the mother been reflected in the assessee s and her mother s balance sheet as on 31.03.2009, i.e., as a gift or loan? In fact, it could also be that the assessee had financed the advance by the mother for the purchase and, accordingly, stands received by him, either from the mother or from the seller directly, in which case the assessee shall have to establish the source with him for the entire Rs. .60 lacs. Further, where there is a prima facie proof of the assessee having been paid by his mother, it is the capacity of the mother that shall have to be demonstrated to satisfactorily explain the source of deposit as being a loan (or gift) from the mother. Again, also relevant in the matter would be the information of whether any the property was purchased during the year, either by the assessee or his mother or both. In view of the foregoing, it is only considered proper to allow the assessee, in the interest of justice, even as observed during hearing, an opportunity to state his case in the matter. The same is accordingly restored back to the file of the AO to enable the assessee to present his case before him. - Decided in favour of revenue for statistical purposes.

Summary

Issues:
1. Appeal against Commissioner of Income Tax (Appeals) order allowing the assessee's appeal contesting assessment under section 143(3) of the Income Tax Act, 1961 for the assessment year 2009-10.
2. Unproved source of cash deposit in the assessee's bank account.
3. Lack of satisfactory explanation regarding cash deposits and advances for property purchase.
4. Misdirection by the Commissioner of Income Tax (Appeals) in accepting the assessee's explanation.
5. Need for further examination of the source of cash deposits and advances.

Analysis:
1. The appeal was filed by the Revenue against the Commissioner of Income Tax (Appeals) order allowing the assessee's appeal challenging the assessment under section 143(3) of the Income Tax Act, 1961 for the assessment year 2009-10. The assessee, an individual with house property and bank interest as regular income sources, was questioned by the Assessing Officer regarding a cash deposit of ?100 lacs in his bank account. The explanation provided by the assessee regarding the source of cash deposits and advances for property purchase was deemed unsatisfactory by the Revenue, leading to the appeal.

2. The main issue revolved around the unproved source of the cash deposited in the assessee's bank account. The Tribunal emphasized the importance of establishing the source of cash, especially in the absence of concrete evidence or documentation supporting the explanation provided by the assessee. The burden of proof lies on the assessee to demonstrate the legitimacy of the cash deposits and advances made, failing which they may be treated as income from undisclosed sources.

3. The Tribunal highlighted the inadequacy of the assessee's explanation regarding the cash deposits and advances for property purchase. Questions were raised regarding the specifics of the property, documents evidencing the transactions, and the nature of the transactions between the assessee and his mother. The lack of contemporaneous evidence and material to support the explanation raised doubts about the genuineness of the transactions, requiring further scrutiny.

4. The Commissioner of Income Tax (Appeals) was criticized for accepting the assessee's explanation without sufficient verification and evidence. The Tribunal noted discrepancies in the explanation provided by the assessee and emphasized the need for a detailed examination of the source of funds, especially in cases involving significant cash deposits and advances for property transactions.

5. Considering the complexity and lack of clarity in the assessee's explanation, the Tribunal decided to remand the case back to the Assessing Officer for a thorough investigation. The assessee was granted an opportunity to present additional evidence and clarify the source of funds, with a directive for the Assessing Officer to make a decision based on the merits of the case and available records. The appeal was disposed of with the aim of ensuring a fair and just assessment process.