2019 (11) TMI 695 - AT - Income Tax

Cash deposits in the saving bank account of assessee - HELD THAT - It is the case of the assessee that he had received loans aggregating to ₹ 25 lakhs from outsiders for purchasing of shipping boat for business purpose. It is also a fact that on such cash deposits which have been received by the assessee, AO vide order dated 22.12.2016 passed u/s 271D had levied penalty on ₹ 13 lakhs which is the unsecured loan to have been received by the assessee by cash from those persons. In such a situation, find force in the argument of the Ld.A.R. that to the extent of ₹ 13 lakhs, the parties have been identified and no addition is warranted to that extent. With respect to the balance amount, no plausible information has been furnished by the Ld.A.R. and nor was he in a position to controvert the findings of AO and Ld.CIT(A). Therefore direct the deletion of addition to the extent of ₹ 16,50,000/- and the balance amount of addition is confirmed. Thus, the ground of the assessee is partly allowed.

Summary

Issues:
Appeal against order of Commissioner of Income Tax (Appeals) for A.Y. 2014-15 - Dismissal of appeal by CIT (A) - Assessment of total income - Unexplained cash deposits in bank account - Addition u/s 69 of the Act - Penalty u/s 271D - Identification of loan providers - Justification of addition - Deletion of addition partially.

Analysis:
The appeal before the Appellate Tribunal ITAT Pune stemmed from the order of the Commissioner of Income Tax (Appeals) for the assessment year 2014-15. The appellant contested the dismissal of the appeal by CIT (A) and the assessment of total income at ?37,27,215. The primary issue revolved around unexplained cash deposits of ?34,36,000 in the appellant's bank account, leading to an addition under section 69 of the Act. The appellant argued that the cash was raised collectively with others for a business venture involving a Parasailing Boat. However, the Assessing Officer (AO) found discrepancies in proving the source of these deposits, leading to the addition. The CIT (A) upheld the AO's decision, prompting the appellant's appeal.

During the proceedings, the appellant clarified that a portion of the cash deposits originated from loans received from identified outsiders, resulting in a penalty under section 271D. The appellant contended that no further addition under section 68 of the Act was warranted concerning these identified loans. The Tribunal acknowledged this argument, directing the deletion of the addition corresponding to ?16,50,000, representing the identified loan amount. However, the remaining balance of the addition was upheld due to insufficient evidence provided by the appellant to counter the AO's and CIT (A)'s findings.

The Tribunal's decision highlighted the importance of substantiating the sources of cash deposits to avoid unexplained income assessments. The partial allowance of the appeal underscored the significance of providing concrete evidence to support claims and the impact of penalties levied under the Act on related additions. The judgment emphasized the need for thorough documentation and clear explanations to justify financial transactions and prevent unwarranted tax implications.

In conclusion, the Tribunal partially allowed the appellant's appeal, deleting a portion of the addition related to identified loans while confirming the remainder. The judgment showcased the critical role of evidence and compliance with tax regulations in addressing unexplained income issues and penalties under the Income Tax Act.