2019 (2) TMI 1267 - AT - Income Tax

Unexplained income from undisclosed sources u/s 68 - substantial gain between the withdrawals and re-deposits in the Bank accounts - HELD THAT - The assessee filed cash flow statement before A.O. which is supported by bank entries contained in both the Banks showing withdrawal of the amount in cash on different dates. The assessee also filed copy of the Agreement to Sell and cash receipts on sale of the car. Assessee referred to all the documents in the paper book and referred to the same items in the cash flow statement prepared by assessee. All the entries in the cash flow statement have not been doubted by the authorities below which are supported by documents on record. Thus, assessee has availability of cash with him. A.O. rejected the explanation of assessee because it was observed that once assessee has withdrawn the cash, it must be used somewhere else because of some necessity. CIT(A) found some substantial gain between the withdrawals and re-deposits in the same Bank accounts. Thus, onus was put upon assessee to prove that he has not spent the amount somewhere on withdrawal of the amount. However, the authorities below never doubted the documents on record and the cash flow statement filed by assessee. In this case the deposits were made after 4-5 years and it was directed that Revenue should show that assessee s explanation should not be accepted, therefore, onus upon assessee would not lay to prove that amount withdrawn from the Bank have not been spent on some other items. A.O. has not brought any evidence on record that the amount withdrawn from the Banks have been spent by assessee somewhere else. There was no justification to reject the explanation of assessee on assumption and presumptions without bringing any evidence on record. Since the assessee is able to explain the source of the cash deposited in the Bank accounts through the cash flow statement, therefore, there was no justification to make the addition. There was no justification for the authorities below to calculate 2% of the expenses for earning of the income. Set aside the Orders of the authorities below and delete the entire addition. - Decided in favour of assessee.

Summary

Issues:
Challenge against addition of unexplained income under section 68 of the I.T. Act, 1961 for A.Y. 2011-2012.

Analysis:
The appeal was filed against the addition of ?34,77,138 as unexplained income from undisclosed sources under section 68 of the I.T. Act, 1961. The assessee had deposited cash exceeding ?10 lakhs in bank accounts with Canara Bank and Oriental Bank of Commerce. The assessee explained the source of these deposits as cash withdrawals from the same banks, cash received from a business, and proceeds from property sale. However, the Assessing Officer (A.O.) rejected the explanation, citing lack of necessity for redepositing cash and discrepancies in timelines. The A.O. also considered 2% expenses as reasonable for earning such income, leading to the addition. The assessee challenged this addition before the Ld. CIT(A), who upheld the A.O.'s decision due to substantial gaps between withdrawals and deposits, emphasizing the onus on the assessee to prove non-spending of withdrawn amounts.

The Learned Counsel for the Assessee presented bank statements, agreements, and cash flow statements to support the availability of cash with the assessee for the deposits. The A.O. and Ld. CIT(A) did not doubt the documents but questioned the necessity for redepositing cash after withdrawal. The Tribunal referred to a case where the onus was on the department to disprove the assessee's explanation, similar to the current scenario. As the A.O. failed to provide evidence of the cash being spent elsewhere, the Tribunal found no justification for rejecting the assessee's explanation based on assumptions. Consequently, the Tribunal set aside the lower authorities' orders and deleted the entire addition, emphasizing the adequacy of the cash flow statement in explaining the source of deposits.

In conclusion, the appeal of the Assessee was allowed, and the addition of unexplained income under section 68 of the I.T. Act, 1961 for A.Y. 2011-2012 was removed.