2021 (5) TMI 439 - AT - Income Tax

Addition u/s.69A of cash deposit in Bank Accounts - facilitator v/s owner of the money deposited in his bank accounts - HELD THAT - As appreciated that the assessee had not deposited his own fund in the impugned bank accounts but he had deposited the amount received from his clients to facilitate payment of premiums to the insurance company. The insurance premium paid from the said bank accounts was not unaccounted receipt or income of the assessee but the said deposits were clearly identifiable amount attributable to the premium of his clients. The assessee had given detailed explanation of each deposits and provided sufficient details and evidences to suggest that the impugned deposits were not in the nature of income of the assessee. During the course of assessment proceedings, the assessee had clearly identified the premium amount of his respective clients and also submitted their premium receipts issued in the names of respective insurers (not the assessee) wherein the details of banks drafts were also mentioned which were issued from the impugned bank account. The evidences like insurance premium receipts of different persons along with corresponding deposited amount in the bank account clearly established the nexus of source of deposits and their subsequent outflow in form of insurance premium. When all the corroborative evidence were clearly suggestive of the fact that the assessee had simply acted as a facilitator to make payment on behalf of the policy holders and where each entries were traceable and identifiable the addition should not be made in the hands of assessee. This way, the assessee had fully discharged his onus of explaining the source of deposits in the bank account particularly with evidences, hence there was no reason for the assessing officer to make addition under section 69A. The assessee was never found to be the owner of the impugned deposits in the said bank accounts particularly in view of the fact that all the said deposits were immediately transferred to the insurance company by wav of insurance premium in the names of the respective insurers and hence there was no question of not recording such investment in the books of accounts of the assessee in as much as there was no investment of the assessee himself. It can be seen from the copies of premium receipts that the mode of payment i.e. demand draft numbers and bank details were mentioned in the premium receipts which showed that the premiums in the names of insurers were paid through the assessee's impugned bank accounts. Therefore, the assessee was only facilitator and was not the owner of the money deposited in his bank accounts. AO has failed to bring any evidence on record to demonstrate that evidences and documents submitted by the assessee, which are mentioned in para Nos.8 and 9 of this order, are false and untrue. Thus, it is quite clear that the learned assessing officer wrongly invoked the provisions of section 69A - Decided in favour of assessee.

Issues Involved:
1. Addition of ?20,52,475/- under Section 69A of the Income Tax Act on account of unexplained cash deposits in bank accounts.

Issue-wise Detailed Analysis:

1. Addition of ?20,52,475/- under Section 69A:
The primary issue in these appeals is the addition of ?20,52,475/- made by the Assessing Officer (AO) under Section 69A of the Income Tax Act, 1961, due to unexplained cash deposits in the assessee’s bank accounts. The assessee, a Senior Territory Manager, had deposited cash amounts of ?26,77,200/- and ?21,71,644/- in two ICICI Bank accounts during the assessment year 2009-10. The AO sought an explanation for these deposits, as the assessee's salary was insufficient to justify them. The assessee claimed that these amounts were collected from investors for investment in insurance plans, but could not provide confirmations from these investors within the given time.

During the assessment proceedings, the assessee explained that the amounts were collected from non-resident investors through sub-agents. However, the AO treated the deposits as unexplained under Section 69A, citing the assessee's failure to prove the identity, creditworthiness, and genuineness of the transactions. Consequently, the AO added ?20,52,475/- to the assessee's total income.

Upon appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] confirmed the AO's addition. The assessee then appealed to the ITAT.

2. Assessee's Evidence and Submissions:
The assessee submitted various documents to support the claim that the deposits were not his income but were collected from clients for insurance premiums. These documents included:
- Acknowledgement of Return of Income
- Form No.16 issued by Reliance Life Insurance Company Limited
- Bank statements and bank books of the relevant ICICI Bank accounts
- Confirmation letters from clients
- Premium collection receipts
- Insurance proposal forms
- PAN cards and other identification documents of the investors

The assessee argued that he acted as a facilitator for insurance policies, collecting premiums from clients and depositing them into his bank accounts before transferring them to the insurance company. The assessee provided detailed explanations and evidence for each deposit, including the nexus between the deposits and the subsequent payment of insurance premiums.

3. ITAT's Findings:
The ITAT noted that the assessee had submitted substantial evidence to prove the genuineness of the transactions. The assessee’s role as a facilitator for insurance policy payments was supported by corroborative evidence, such as premium receipts and bank details linking the deposits to the insurance payments. The ITAT observed that the AO did not refute or discredit these documents and failed to provide any evidence to demonstrate that the documents submitted by the assessee were false.

The ITAT concluded that the AO wrongly invoked Section 69A, as the assessee had adequately explained the source of the deposits with supporting evidence. Consequently, the ITAT deleted the addition of ?20,52,475/-.

4. Application to Other Appeals:
The ITAT's observations and decisions in the appeal for the assessment year 2009-10 were applied mutatis mutandis to the appeals for the assessment years 2010-11 and 2011-12, as the issues involved were similar.

Conclusion:
The appeals filed by the assessee for the assessment years 2009-10, 2010-11, and 2011-12 were allowed. The ITAT deleted the additions made by the AO under Section 69A, concluding that the assessee had sufficiently explained the source of the cash deposits with credible evidence. The judgment emphasized that this decision was based on the specific facts of the case and should not be treated as a precedent for other assessment years.

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