2019 (2) TMI 1203 - AT - Income Tax

Penalty u/s 271(1)(c) - addition of cash deposits - withdrawing cash from one account and re depositing in another account - HELD THAT - There was no rational in withdrawing cash from one account and re depositing in another account because she could have issued cheques or RTGS. Although this view taken by the AO was accepted by the assessee and the addition made on account of unexplained cash deposits was not disputed by her in appeal, the fact remains to be seen is that there were withdrawals made by the assessee in cash from her bank account with UBI and source of cash deposits to that extent was explained. As rightly contended on behalf of the assessee before the authorities below as well as the before the Tribunal, the assessee had declared a total income of ₹ 5,38,680/- for the year under consideration while her husband had declared a total income of ₹ 32,30,900/- for the year under consideration and keeping in view this quantum of family income declared for the year under consideration as well as for the earlier years, the availability of cash to the extent of ₹ 1,55,000/- out of savings of the year under consideration as well as earlier years cannot be doubted. We are of the view that even though the addition of ₹ 1,55,000/- on account of unexplained cash deposits was made by the AO and the same was accepted by the assessee, the said amount cannot be considered as concealed income of the assessee for imposition of penalty u/s 271(1)(c). - Decided in favour of assessee.

Summary

Issues:
Penalty under section 271(1)(c) for unexplained cash deposits.

Analysis:
The case involved an appeal against a penalty imposed by the Assessing Officer (AO) under section 271(1)(c) of the Income Tax Act, 1961, relating to unexplained cash deposits made by the assessee. The AO added ?1,55,000 to the total income of the assessee as unexplained cash deposits under section 69 during the assessment proceedings. Subsequently, a penalty of ?31,390 was imposed by the AO, which led to the initiation of penalty proceedings. The assessee challenged the penalty before the Ld. CIT(A), arguing that the cash deposits were from legitimate sources, considering her declared income and her husband's income. However, the Ld. CIT(A) upheld the penalty, stating that the assessee failed to provide a reasonable explanation for the unexplained deposits, as required under section 271(1)(c) of the Act.

The Tribunal noted that the assessee had explained a portion of the cash deposits as withdrawals from another bank account, which the AO did not accept due to discrepancies in dates. Despite this, the Tribunal considered the family's total income, including the husband's earnings, and found it reasonable that the cash deposits of ?1,55,000 could be sourced from savings accumulated over the years. The Tribunal observed that the addition of ?1,55,000 as unexplained cash deposits, though accepted by the assessee, did not amount to concealed income justifying a penalty under section 271(1)(c). Consequently, the Tribunal canceled the penalty imposed by the AO and upheld by the Ld. CIT(A), allowing the appeal of the assessee.

In conclusion, the Tribunal ruled in favor of the assessee, canceling the penalty imposed under section 271(1)(c) for unexplained cash deposits, considering the family's total income and savings, and determining that the unexplained deposits did not constitute concealed income warranting a penalty.