2020 (5) TMI 543 - AT - Income Tax

Reopening of assessment u/s 147 - unexplained cash credit u/s 68 - HELD THAT - No fault with the action of the ld AO, as the information was received from AIR and the return of income of the assessee did not show the complete details about the above deposit. Further, in response to the query letters of the AO, assessee did not reply. Therefore, AO has reason to believe about escapement of income. Thus ground no 1 is dismissed. Though the assessee has supported the same with the cash flow statement as well as the sum received from her professional practice and from partnership firm - when the assessee filed her return of income she included the professional income of ₹ 518831/- as well as remuneration and interest from partnership firm of Priyadarshi Hospital ₹ 219415/-. Her individual gross receipt from private practice shows Gross professional income of ₹ 885690/- which was deposited in that bank account. While explaining the source the assessee has categorically stated that, the above professional receipt was deposited in the bank account of the assessee. Therefore, addition to that extent naturally amounts to double addition. She was having opening cash balance in hand of ₹ 325492/- which was also deposited. Therefore, the addition on that account also deserves to be deleted in absence of any other finding contrary by the revenue. This left us the sum of ₹ 3 lakh received by the assessee from Priyadarshi Hospital. The assessee was a partner in that firm. Undoubtedly, the account submitted by the assessee was not authenticated by stating the PAN. We also do not find information about return of income etc of that firm in the paper book submitted by the assessee. In view of this, we direct the ld AO to delete the addition to the extent of ₹ 325492/- and ₹ 885690/-. However, with respect to the receipt of ₹ 3 lakhs from Priyadarshi Hospital requires proper verification. Accordingly, to that extent only, we set aside the issue of verification of cash receipt of only ₹ 3 lakh from Priyadarshi Hospital by the assessee back to the file of the ld AO with a direction to the assessee to submit the authentic ledger stating PAN of that partnership firm. - Appeal of the assessee is partly allowed

Summary

Issues:
1. Reopening of assessment based on cash deposits in bank accounts.
2. Addition made under section 69 of the Income Tax Act, 1961.
3. Authentication of ledger accounts and PAN details.
4. Source of cash deposits and explanations provided by the assessee.
5. Assessment of unexplained cash credits.

Issue 1: Reopening of assessment based on cash deposits in bank accounts:
The Assessing Officer (AO) received information that the assessee had deposited cash in her savings bank account. Despite issuing multiple letters for verification and receiving no response, the AO issued notices under sections 148 and 142(1) of the Act. The AO made additions treating the cash deposits as unexplained income. The Tribunal upheld the AO's action, stating that the AO had valid reasons to believe there was an escapement of income, given the lack of details in the return and non-response to queries.

Issue 2: Addition made under section 69 of the Income Tax Act, 1961:
The assessee contended that the cash deposits were from professional fees, opening cash balance, and receipts from a partnership firm. The CIT (A) dismissed the appeal due to unauthenticated ledger accounts. The Tribunal found that the deposits were explained by the professional income and opening cash balance. However, the receipt from the partnership firm required verification. The Tribunal directed the AO to delete the additions related to the professional income and opening cash balance but to verify the receipt from the partnership firm.

Issue 3: Authentication of ledger accounts and PAN details:
The Tribunal emphasized the importance of authenticated ledger accounts and PAN details for verification of cash deposits. The absence of proper documentation led to the addition of unexplained income. The Tribunal directed the AO to delete the additions where the source of deposits was adequately explained but required verification for other sources.

Issue 4: Source of cash deposits and explanations provided by the assessee:
The assessee, a doctor and partner in a hospital, explained the sources of cash deposits from professional fees, partnership firm receipts, and opening cash balance. The Tribunal accepted the explanations for certain deposits but required further verification for specific amounts received from the partnership firm and as gifts from relatives.

Issue 5: Assessment of unexplained cash credits:
The Tribunal partially allowed the appeals, deleting additions related to explained sources of cash deposits but directing further verification for certain amounts. The Tribunal set aside the issues for verification of specific cash receipts and gifts, emphasizing the need for authentic documentation and explanations for all sources of income.

This detailed analysis covers the issues raised in the judgment, providing a comprehensive overview of the Tribunal's decision and the arguments presented by the parties involved.