2019 (8) TMI 771 - AT - Income Tax

Addition on account of cash deposit in Bank Account - non production of parties from whom cash received - HELD THAT - The AO in the instant case made addition on the ground that the assessee could not explain the source of such cash deposits in the bank account and the parties from whom assessee has shown to have received cash have denied/not confirmed any transaction with the assessee. I find the Ld. CIT(A) upheld the action of the AO, the reasons of which have already been reproduced in the preceding paragraph. It is the submission of the Ld. Counsel for the assessee that given an opportunity the assessee is in a position to produce those parties before the AO to substantiate the transactions by them with the assessee so as to explain the cash deposits in the bank account. Considering the totality of the facts of the case and in the interest of justice, I deem it proper to restore the issue to the file of the AO with a direction to give one final opportunity to the assessee to substantiate its case by producing the various parties in question to substantiate the cash deposit in the bank account. Penalty u/s 271(1)(c) - quantum addition restore to AO - HELD THAT - AO levied penalty on account of addition made by him being unverified cash deposit which has been upheld by the CIT(A) - Since, the quantum addition has been restored to the file of the AO, therefore, the penalty so levied by the AO and upheld by the CIT(A) does not survive. Accordingly, the same is cancelled. However, the AO is at liberty to initiate fresh penalty proceedings u/s 271(1)(c) after completion of the assessment in the set aside proceedings

Summary

Issues:
1. Quantum addition of unexplained cash deposits in the bank account.
2. Confirmation of penalty under section 271(1)(c) of the Income Tax Act.

Issue 1: Quantum addition of unexplained cash deposits in the bank account
The case involved the assessee making cash deposits in a bank account, with the AO questioning the source of these deposits. The assessee explained that the cash was collected from sundry debtors of a pharmaceutical firm and deposited in the bank account. The AO made an addition of unexplained cash credits under section 68 of the Income Tax Act, as certain parties denied the transactions or were not produced before the AO. The CIT(A) upheld the AO's decision, stating that despite detailed enquiries and summons issued to parties, only a portion of the transactions were confirmed. The Tribunal considered the arguments and directed the AO to give the assessee a final opportunity to produce the parties in question to substantiate the cash deposits, emphasizing the need for due process and substantiation of claims.

Issue 2: Confirmation of penalty under section 271(1)(c) of the Income Tax Act
The AO levied a penalty on the unverified cash deposit, which was upheld by the CIT(A). However, since the quantum addition was restored to the AO for further consideration, the Tribunal canceled the penalty. The Tribunal allowed the assessee's appeal against the penalty, noting that fresh penalty proceedings could be initiated after the assessment in the set-aside proceedings. The Tribunal clarified that the penalty did not survive due to the restoration of the quantum addition issue. Consequently, the penalty was canceled, and the assessee's appeal in this regard was allowed.

In conclusion, the Tribunal allowed the appeal related to the quantum addition for further substantiation by the assessee and canceled the penalty pending the outcome of the reassessment proceedings. The judgment emphasized the importance of providing opportunities for the assessee to substantiate claims and ensuring proper adherence to legal procedures in tax assessments and penalties.