2018 (4) TMI 1364 - AT - Income Tax

Cash deposits from undisclosed source - proof of withdrawal of cash - Held that - By filing the bank statement, the contention of the assessee is that it has withdrawn cash of ₹ 14,43,149/- in the financial year 2012-13 and has made cash deposit of ₹ 5,00,000/- during the said year and hence, it had cash balance of ₹ 9,43,149/- at his disposal as at the beginning of the financial year 2013-14, which was utilised for deposit of cash in this year in the bank. We find that this contention of the assessee needs to be verified by the Assessing Officer before adjudicating the issue. We restore back the issue of deposit of ₹ 9,00,000/- out of opening cash balance of the assessee to the file of the Assessing Officer for adjudication afresh. As regards deposit of ₹ 1,70,000/- claimed to be out withdrawals of ₹ 2,87,360/- made during the year, it is observed that the said withdrawals are prior to the deposit of ₹ 1,70,000/- made by the assessee in the bank on 9.5.2013. The revenue could not bring any material on record to show that the assessee could not have utilised these withdrawals made at the earlier point of time that the deposit made in the bank account of ₹ 1,70,000/- on 9.5.2013. Hence, we set aside the orders of the lower authorities on this issue and vacate the disallowance of ₹ 1,70,000/- made by the Assessing Officer - Decided partly in favour of assessee for statistical purposes.

Summary

Issues:
1. Addition of ?10,70,000 made by the Assessing Officer.

Analysis:
The sole issue in this appeal was the addition of ?10,70,000 by the Assessing Officer. The Assessing Officer found that the assessee deposited this amount in a savings bank account but failed to explain the source of the cash deposits. The CIT(A) confirmed the addition as the assessee did not maintain proper books of accounts and could not substantiate the source of the deposits. The CIT(A) disbelieved the explanation provided by the assessee regarding the source of the cash deposits due to inconsistencies in the bank transactions' narrations. The CIT(A) upheld the addition of ?10,70,000 as unexplained cash deposits.

Upon further review, the ITAT noted that the assessee had not maintained regular books of accounts. The assessee claimed that the cash deposits were from the opening cash balance, but failed to provide substantial evidence to support this claim. The ITAT found discrepancies in the explanations provided by the assessee and observed that the assessee did not submit relevant documents during the initial assessment. However, the ITAT acknowledged that the assessee had filed a bank statement for the financial year 2012-13 during the appeal, indicating a cash balance at the beginning of the next financial year. To ensure justice, the ITAT remanded the issue of the ?9,00,000 deposit back to the Assessing Officer for further examination.

Regarding the deposit of ?1,70,000, claimed to be from earlier withdrawals, the ITAT found no evidence to suggest that the withdrawals could not have been utilized for the subsequent deposit. As a result, the ITAT set aside the lower authorities' decision on this issue and vacated the disallowance of ?1,70,000. The ITAT partially allowed the appeal for statistical purposes, concluding that the assessee's explanations lacked sufficient basis and evidence. The ITAT's decision aimed at ensuring a fair and thorough examination of the source of the cash deposits, emphasizing the need for proper verification and substantiation of claims in such cases.

In conclusion, the ITAT's judgment highlighted the importance of maintaining accurate financial records and providing substantial evidence to support claims, especially in cases involving unexplained cash deposits. The decision aimed to uphold the principles of justice and thorough assessment while allowing partial relief to the assessee based on the specific circumstances and evidence presented during the appeal process.