2020 (11) TMI 826 - AT - Income Tax

Reopening of assessment u/s 147 - eligibility of reasons to believe - HELD THAT - There is no infirmity in action u/s 148 of the Act wherein, there was a requisite information and the ld AO has applied his mind and found that there is reason to believe for the reopening of the assessment as according to AIR information assessee has deposited ₹ 1049000/- in his bank account with Laxmi Vilas Bank Ltd - There is no infirmity in the reopening of the assessment. Accordingly, ground No. 1 and 2 of the appeal are dismissed. Addition u/s 69 - unexplained source of cash deposit - HELD THAT - Out of the above ₹ 2 lakhs the source of ₹ 26,000/- has been explained by the assessee whereas the balance of ₹ 174,000/- remains unexplained. In view of the above analysis, we direct the ld AO to delete the addition of ₹ 340,000/- out of the addition of ₹ 514000/- sustained by the ld CIT (A) as the source to the above deposit is explained by the assessee out of the withdrawal of cash from the same bank account which was not found to have been utilized by the assessee for any other purposes. Merely some time lag between the withdrawal and deposit without any contrary evidence that such withdrawal has been used by assessee for some other purposes, cannot go against the assessee. Ld CIT (A) has used this proposition to confirm the above addition. Accordingly, we direct ld AO to delete the addition of ₹ 340000/- out of ₹ 514000/- sustained by CIT (A). Thus, This ground of appeal of the assessee is partly allowed.

Issues:
1. Legality of assessment proceedings under section 147
2. Addition of unexplained cash deposit under section 69
3. Source of cash deposits and explanation by the assessee

Issue 1: Legality of assessment proceedings under section 147
The appeal was filed against the order of the ld CIT(A) for the AY 2011-12, where the appeal of the assessee was partly allowed. The assessee contended that the assessment proceedings under section 147 were bad in law and needed to be quashed as they were contrary to legislative provisions. The ld AO initiated proceedings under section 147 based on information available without proper inquiry to establish reasons to believe that income had escaped assessment. However, the Tribunal found no infirmity in the action under section 148, as there was a requisite information and the ld AO had valid reasons to reopen the assessment based on the cash deposits made by the assessee. Therefore, grounds 1 and 2 of the appeal were dismissed.

Issue 2: Addition of unexplained cash deposit under section 69
The ld CIT(A) confirmed the addition of ?5,14,000 under section 69A of the Act as unexplained cash deposits. The assessee argued that the deposits were made from cash withdrawals from banks or other sources. The Tribunal analyzed the detailed cash flow statement submitted by the assessee, which explained various deposits and their sources. After careful consideration, the Tribunal found that a significant portion of the deposits were adequately explained by the assessee through corresponding cash withdrawals from the same bank account. Therefore, the Tribunal directed the ld AO to delete the addition of ?3,40,000 out of the total sustained addition of ?5,14,000, as the source of these deposits was satisfactorily explained by the assessee. The Tribunal emphasized that a time lag between withdrawal and deposit, without contrary evidence of diversion, should not be held against the assessee.

Issue 3: Source of cash deposits and explanation by the assessee
The assessee, an individual, had made cash deposits in a bank account based on AIR information. The ld AO passed an assessment order under section 144, adding the deposited amount to the income of the assessee. The assessee's appeal resulted in partial relief, with a portion of the deposit being explained as part of a withdrawal from the bank account. The Tribunal noted that the assessee had provided detailed item-wise explanations for the deposits and their sources, demonstrating that a significant portion of the deposits were linked to cash withdrawals from the same bank account. The Tribunal accepted the explanations provided by the assessee for various deposits, leading to the partial allowance of the appeal.

In conclusion, the Tribunal partly allowed the appeal of the assessee, directing the deletion of a portion of the addition made under section 69A of the Act. The Tribunal emphasized the importance of providing explanations for cash deposits and withdrawals, highlighting that a time gap between withdrawal and deposit should not automatically lead to adverse conclusions.

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