2020 (2) TMI 18 - AT - Income Tax

Unexplained cash credit u/s 68 - onus to prove - HELD THAT - Assessee has to prove three main ingredients viz., the identity of the creditor, credit worthiness of the creditor and the genuineness of the transactions. In the instant case, it is the claim of the assessee that she has received ₹ 12.00 lakhs and ₹ 4.00 lakhs respectively from her brother and mother. The copies of Statement of total income/income tax returns were furnished to show that both the above said persons are having credit worthiness for make the above said payments. As noticed earlier, both are assessed to income tax and are declaring total income exceeding ₹ 25.00 lakhs. Since both the persons are blood relations, the transactions have been entered through cash. Besides the above, Shri Abhilash is a director of a company and the said company has also confirmed the transactions entered between it and Shri Abhilash. Though the assessee furnished copies of income tax returns of Smt. Subhashini (mother) before the AO, a specific confirmation letter was not filed. Documents show that the identity of the creditors was not doubted and the credit worthiness of both the creditors, in my view, has been proved. Since the transactions were between blood relatives, in the facts of this case, the genuineness cannot be doubted. Hence addition of ₹ 12.00 lakhs and ₹ 4.00 lakhs referred above was not justified Remaining deposit of ₹ 14.00 lakhs - assessee has submitted that she has used her past withdrawals for making the above deposits ad is also having good income and her past savings were also used to make the above said deposits - HELD THAT - AO has rejected the above said explanations of the assessee without examining the cash flow statement of the assessee. There is no bar for depositing cash withdrawals again into the bank account. When the assessee has not spent the cash withdrawals, it is quite natural to deposit the said amount into the bank account. In order to reject the above said claim of the assessee, it is necessary to show that the assessee has spent the amount so withdrawn. Accordingly I am of the view that the addition of ₹ 14.00 lakhs require fresh examination at the end of the AO. Accordingly I set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of the AO for examining the claim of the assessee with the statement of cash withdrawal - Appeal of the assessee is treated as partly allowed

Summary

Issues:
1. Addition of ?30.00 lakhs under section 68 of the Act based on unexplained cash credit.
2. Verification of sources for the cash deposits made by the assessee in her bank account.

Analysis:

Issue 1: Addition of ?30.00 lakhs under section 68 of the Act
The case involved a challenge by the assessee against the addition of ?30.00 lakhs made by the Assessing Officer (AO) under section 68 of the Income Tax Act. The AO added this amount as unexplained cash credit after the assessee failed to substantiate the sources for the cash deposits made in her bank account. The Ld CIT(A) upheld the AO's decision. However, the Ld A.R contended that the assessee provided confirmation letters and documents to prove the receipt of cash from her brother and mother. The Ld A.R argued that the creditworthiness and identity of the individuals were established through income tax returns and other documents. The Ld D.R, on the other hand, claimed that the assessee did not provide sufficient evidence to discharge the burden under section 68. After considering the arguments, the Accountant Member found that the assessee successfully proved the identity and creditworthiness of the creditors, her brother and mother. The Accountant Member set aside the additions of ?12.00 lakhs and ?4.00 lakhs, directing the AO to delete them.

Issue 2: Verification of sources for cash deposits
Regarding the remaining deposit of ?14.00 lakhs, the assessee explained that it was made using her past withdrawals. The Ld A.R argued that the cash flow statement supported this claim. However, the AO rejected this explanation without examining the cash flow statement. The Accountant Member noted that there was no prohibition on redepositing cash withdrawals into a bank account if not spent. Therefore, the addition of ?14.00 lakhs required further examination by the AO. The Accountant Member set aside the decision of the Ld CIT(A) on this issue and remanded it to the AO for a fresh assessment based on the cash withdrawal statement provided by the assessee.

In conclusion, the appeal of the assessee was partly allowed, with the Accountant Member providing detailed reasoning for each issue and directing appropriate actions to be taken by the AO for further examination and deletion of the additions based on the evidences presented by the assessee.