2017 (9) TMI 1021 - AT - Income Tax

Addition u/s 68 - unexplained cash deposits - proof of gifts receipts - Held that - CIT(A) after considering the facts of the case has rightly held that the assessee has only formulated a story to explain the cash deposits in the bank account, which was rightly rejected by the first appellate authority. The Ld. CIT(A) has also rejected the plea of the assessee with regard to peak amount to be adopted as unexplained cash deposits on the ground that the said plea is only possible if the assessee would have proved it by any evidence regarding the nexus of cash deposits with that of withdrawals and was again deposited in the bank account but since assessee has failed to submit reconciliation statement and nexus between cash withdrawal and cash deposits, therefore, the entire plea raised by the assessee was rightly found to be unsustainable and unreliable. Apart from that, no new evidence or material have been brought before us to prove and support their plea put forth before us and, therefore, we do not see any reason to deviate from the finding given by the CIT(A) while dealing with the said issue. In our considered view, the first appellate authority has passed a well-reasoned order and we do not find any reason to take a different view. However, since it is not in dispute that the out of 33 Parties 17 Parties have confirmed the gifts having been given to the assessee, we are of the view that these gifts should be treated as genuine and they should not be treated as unexplained cash credits u/s 68 of the Act. Accordingly, we direct the Assessing Officer to delete the addition to the extent of the gifts received from these 17 parties as listed out in the assessment order and pass orders accordingly. - Decided partly in favour of assessee.

Issues Involved:
1. Confirmation of addition under Section 68 of the Income-tax Act, 1961 for unexplained cash deposits.
2. Validity and genuineness of gifts received by the assessee.
3. Reconciliation of cash deposits with cash withdrawals.

Detailed Analysis:

1. Confirmation of Addition under Section 68 for Unexplained Cash Deposits:
The appeal revolves around the addition made by the Assessing Officer (AO) under Section 68 of the Income-tax Act, 1961, concerning unexplained cash deposits amounting to ?28,35,400/- in the assessee's bank accounts. The AO noted that the assessee failed to provide satisfactory evidence to explain the source of these cash deposits. Despite submitting some details, the assessee's cash book was deemed unreliable. The AO found inconsistencies in the confirmations provided by the assessee concerning gifts received, leading to the conclusion that the assessee did not discharge the onus of proving the source of cash deposits. Consequently, the AO treated the cash deposits as unexplained income under Section 68.

2. Validity and Genuineness of Gifts Received:
The assessee claimed that the cash deposits were sourced from gifts received on his 25th wedding anniversary and cash withdrawals from his bank accounts. However, the AO and the Commissioner of Income-tax (Appeals) [CIT(A)] found discrepancies in the confirmations of the gifts. Specifically, out of 33 claimed donors, only 17 provided confirmations, and several PAN numbers were either invalid or repeated. The CIT(A) observed that there was no substantial evidence to corroborate the occasion of the gifts or the financial capability of the donors. The claim of receiving ?9,00,000/- as gifts was thus treated as unexplained cash credit under Section 68.

3. Reconciliation of Cash Deposits with Cash Withdrawals:
The assessee argued that the cash deposits were merely a circulation of money withdrawn from other bank accounts. However, the AO and CIT(A) rejected this claim due to the lack of a proper reconciliation statement or nexus between the withdrawals and deposits. The CIT(A) noted that the assessee failed to provide documentary evidence to substantiate the claim that the withdrawals were for starting a business, which did not materialize, and thus the amounts were redeposited. The appellate authority held that the explanation was self-contradictory and unsupported by evidence.

Conclusion:
The Income Tax Appellate Tribunal (ITAT) upheld the CIT(A)'s decision, agreeing that the assessee failed to provide satisfactory evidence to explain the source of the cash deposits. The ITAT found that the assessee's narrative about the gifts and cash withdrawals was inconsistent and lacked documentary support. However, the ITAT acknowledged that gifts from 17 confirmed parties should be treated as genuine and directed the AO to delete the addition to the extent of these confirmed gifts. The appeal was thus partly allowed, with the ITAT affirming the CIT(A)'s well-reasoned order but providing partial relief concerning the confirmed gifts.

Order Pronounced:
The appeal of the assessee was partly allowed, and the order was pronounced in the open court on 11th July 2017.

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