2021 (1) TMI 838 - AT - Income Tax

Addition being cash deposits in the assessee s bank account - addition u/s 68 or 69A - As argued additions were made under erroneous section, i.e., section 69A which is not applicable in the instant case and addition if at all ought to have been made u/s 68 - HELD THAT - The total addition made on account of unexplained cash deposits in the bank account is amounting to ₹ 10,83,000. The A.O. has not even given credit to the cash withdrawals made on 10.05.2014 amounting to ₹ 2,85,000. The financials for the period 31.03.2012, 31.03.2013 and 31.03.2014 have not been properly considered by the CIT(A). CIT(A) has also not taken into account the audit report concerning assessment year 2010-2011.Therefore, in the interest of justice and equity, one more opportunity should be granted to the assessee. Accordingly, the issues raised in this appeal are restored to the files of the AO. The assessee shall cooperate with the Revenue and shall furnish the necessary details. The assessee shall not seek unnecessary adjournment. The A.O. shall pass an order after affording reasonable opportunity for hearing. Appeal filed by the assessee is allowed for statistical purposes.

Issues Involved:
1. Addition of ?10,83,000 as unexplained cash deposits in the assessee's bank account.
2. Non-consideration of cash withdrawals and financial statements by the CIT(A).
3. Applicability of Section 69A vs. Section 68 of the I.T. Act.

Detailed Analysis:

1. Addition of ?10,83,000 as Unexplained Cash Deposits:
The primary issue revolves around the addition of ?10,83,000 made by the Assessing Officer (A.O.) under Section 69A of the Income Tax Act. The A.O. scrutinized the cash deposits made in the assessee’s bank accounts with Ilkal Co-op Bank Ltd. and Shri Vijayamahantesh Co-op Bank Ltd., and found that the assessee failed to satisfactorily explain the sources of these deposits. The A.O. noted that the assessee had not filed returns of income prior to the assessment year 2015-16, and the opening capital balance shown in the statement of affairs was without any supporting evidence. Consequently, the A.O. concluded that the cash deposits were unexplained, leading to the addition of ?10,83,000 under Section 69A read with Section 115BBE.

2. Non-consideration of Cash Withdrawals and Financial Statements by the CIT(A):
The CIT(A) upheld the A.O.'s addition, stating that the appellant was unable to prove that the sources of the deposits were from withdrawals from the capital of earlier years. The CIT(A) found the explanation of the assessee, that the deposits were from old capital, to be illogical and unsupported by evidence. The CIT(A) emphasized the long gap of four years and the lack of linking evidence to support the claim. The CIT(A) also noted that the assessee failed to produce sufficient evidence during the assessment and appellate proceedings to substantiate the claim of earlier withdrawals being the source of current deposits.

3. Applicability of Section 69A vs. Section 68 of the I.T. Act:
The assessee raised an additional ground, arguing that the CIT(A) should have set aside the assessment order because the additions were made under the erroneous section, i.e., Section 69A of the I.T. Act, instead of Section 68. However, no arguments were made regarding this issue, and hence, it was not adjudicated.

Tribunal's Decision:
The Tribunal noted that the A.O. did not give credit for the cash withdrawals made on 10.05.2014 amounting to ?2,85,000. It also observed that the financial statements for the periods ending 31.03.2012, 31.03.2013, and 31.03.2014, which were crucial for understanding the cash flow and opening cash balances, were not properly considered by the CIT(A). Furthermore, the audit report for the assessment year 2010-2011 was not taken into account.

In light of these oversights, the Tribunal decided that the interest of justice and equity required granting the assessee another opportunity. The Tribunal restored the issues to the files of the A.O., directing the assessee to cooperate with the Revenue and provide the necessary details without seeking unnecessary adjournments. The A.O. was instructed to pass an order after affording a reasonable opportunity for hearing.

Conclusion:
The appeal filed by the assessee was allowed for statistical purposes, with the Tribunal ordering a remand to the A.O. for a fresh assessment considering the financial statements and audit reports not previously accounted for.

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