2018 (10) TMI 1390 - AT - Income Tax

Addition u/s 68 - Unexplained cash credit - failure to establish the source with documentary evidences - CIT(A) deleted the addition - Held that - The assessee has not established the fact that he has given the loans to various persons, which were recovered in cash and deposited the same. The assessee also did not admit any interest on loans as observed from the orders of lower authorities. Since the assessee failed to establish the source with documentary evidences and had accepted the addition before the A.O. and has taken U-turn and the Ld. CIT(A) accepted the source of cash deposits without any supporting documents, the issue require detailed enquiry with regard to the source of cash deposits. The assessee required to submit the evidences having given the loans to the various persons and the same was recovered in cash. He cannot get away simply by saying that the cash deposit represent recovery of loans. It is obligation on the part of the assessee to furnish the details and cooperate with the department. Therefore, we remit the entire matter back to the file of the A.O. to conduct detailed enquiries and to redo the assessment de-novo. - Decided in favour of revenue for statistical purposes.

Issues Involved:
1. Addition made by the Assessing Officer (A.O.) under Section 68 of the Income Tax Act, 1961.
2. Explanation and evidence provided by the assessee for the source of cash deposits.
3. Acceptance of additional evidence by the Commissioner of Income Tax (Appeals) [CIT(A)].
4. Compliance with Rule 46A regarding additional evidence.
5. Remand and reassessment by the A.O.

Detailed Analysis:

1. Addition made by the A.O. under Section 68 of the Income Tax Act, 1961:
The A.O. added ?78,75,000 to the assessee's income under Section 68, citing unexplained cash deposits in two HDFC bank accounts. The deposits were ?11,25,000 and ?67,50,000 respectively. The assessee initially explained the deposits as recoveries of loans given to friends and relatives, but failed to provide sufficient evidence.

2. Explanation and evidence provided by the assessee for the source of cash deposits:
During assessment, the assessee claimed the cash deposits were recoveries of advances given to friends and relatives, and withdrawals from ATMs. The A.O. issued summons to some debtors, six of whom confirmed the loans. However, letters to other debtors were returned unserved or went unanswered. The assessee later accepted the addition to avoid litigation, failing to provide concrete evidence for the cash deposits.

3. Acceptance of additional evidence by the CIT(A):
On appeal, the CIT(A) considered the assessee's additional evidence, including bank statements and cash books, which were not presented to the A.O. The CIT(A) verified the deposits and concluded that the assessee had given advances, which were returned in cash. The CIT(A) directed the A.O. to estimate interest at 12% per annum on the advances and delete the addition made towards unexplained cash credits.

4. Compliance with Rule 46A regarding additional evidence:
The revenue argued that the CIT(A) accepted additional evidence without giving the A.O. an opportunity to review it, violating Rule 46A. The A.O. had not been presented with the bank statements and cash books during the initial assessment, and the CIT(A) did not call for a remand report. The revenue contended that the CIT(A) should have allowed the A.O. to examine the new evidence.

5. Remand and reassessment by the A.O.:
The Tribunal found that the assessee failed to provide sufficient documentary evidence to support the source of the cash deposits. The Tribunal noted that the assessee did not produce debtors or confirmations from them, and merely presenting bank statements and cash books was insufficient. Therefore, the Tribunal remanded the matter back to the A.O. for a detailed enquiry and de-novo assessment, requiring the assessee to submit proper evidence of the loans given and recovered in cash.

Conclusion:
The appeal filed by the revenue was allowed for statistical purposes, and the case was remanded back to the A.O. for a thorough reassessment. The assessee is required to provide detailed evidence of the loans and their recovery in cash to substantiate the source of the cash deposits.

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