2019 (6) TMI 302 - AT - Income Tax

Unexplained cash deposited in the Bank account - HELD THAT - The assessee has given an explanation regarding total cash deposit in the Bank Account. The assessee also explained that out of the total transactions and total cash deposit in the Bank account there is still amount left for house hold expenses. The explanation of assessee was not found to be incorrect. The assessee further explained that he has salary and consultancy income which have been shown in the return of income. Whatever income have been shown in the return of income is available to the assessee to explain the cash deposited in the Bank account therefore there was no justification to restrict the addition accordingly set aside the Orders of the authorities below and delete the addition - Decided in favour of assessee. Cash deposit being made out of sale of car - A.O. observed that assessee filed affidavit of the purchaser of the car which has neither been signed by the witness or Oath Commissioner and the R.C. is still in the name of the assessee showing the ownership - CIT(A) did not accept the contention of assessee because car is not transferred in the name of the purchaser - HELD THAT - The assessee explained that car is sold for cash of 3, 21, 900/- to Shri Parvender Singh who has executed an affidavit in favour of the assessee confirming the purchase of the Car. The A.O. did not examine the deponent of the Affidavit. A.O. did not dispute the amount withdrawn by him from his Bank account. Thus sufficient cash is available with the purchaser to purchase the car. A.O. doubted the explanation of assessee because Affidavit is not attested by the Oath Commissioner and that registration of the Car is still in the name of the assessee. It generally happens in case of purchaser of motor vehicle purchaser did not get the vehicle transferred in their name for a longer time. If A.O. was having any doubt over the transaction he could have summon the purchaser of the car and record his statement to verify the facts. However no inquiry have been done in the matter. Therefore there was no justification to disbelieve the explanation of assessee. A.O. did not make any effort to verify whether car was still in possession of the assessee. In this view of the matter set aside the Orders of the authorities below and delete the addition - Decided in favour of assessee.

Summary

Issues:
1. Addition of unexplained cash deposits in the bank account.
2. Addition related to the sale of a car.

Analysis:

*Issue 1: Addition of unexplained cash deposits in the bank account*
The Assessing Officer (A.O.) made an addition of INR 3,91,600 as unexplained cash deposits in the bank account of the assessee. The A.O. observed a difference between the declared income and the cash deposits, leading to the conclusion that the source of the additional cash remained unexplained. The assessee contended that the cash deposits were utilized for household expenses, with a detailed breakdown provided. The A.O. rejected the explanation, citing inconsistencies in the information provided. The Commissioner of Income Tax (Appeals) [CIT(A)] reduced the addition to INR 2 lakhs based on the assessee's submissions. The ITAT held that the assessee's explanation was satisfactory, as the declared income covered the cash deposits. The ITAT set aside the lower authorities' orders and deleted the addition of INR 2 lakhs, allowing ground no. 3 of the assessee's appeal.

*Issue 2: Addition related to the sale of a car*
The A.O. added INR 3,21,900 as unexplained income from the sale of a car, citing lack of satisfactory evidence. The assessee provided an affidavit from the car purchaser and bank statements to support the transaction. The CIT(A) dismissed the claim due to the car not being transferred to the purchaser's name. The ITAT found that the purchaser had sufficient cash to make the purchase, but the A.O. did not adequately verify the transaction. The ITAT noted that the delay in transferring vehicle ownership is common and criticized the lack of inquiry by the A.O. The ITAT set aside the lower authorities' orders and deleted the addition, allowing ground no. 4 of the assessee's appeal.

In conclusion, the ITAT partially allowed the assessee's appeal, deleting both the additions related to unexplained cash deposits and the sale of the car. The judgment emphasizes the importance of thorough verification by tax authorities and the need for justifiable reasoning behind additions to an assessee's income.