2021 (8) TMI 278 - AT - Income Tax

Unexplained money deposited in bank account - stand of the assessee was that the cash deposited in his bank accounts are from the prospective buyers of vehicles/agricultural implements from where, he is working as Exchange Manager. Later on the cash was withdrawn and handed over to the employer i.e., Automobile Company - HELD THAT - Here in this case, the material facts strongly indicate a probability that the buyers of vehicles/agricultural implements had deposited the cash in various places in the account of the assessee and it was the liability on the part of the assessee to withdraw the same and alternatively paid the same to his employer - this case falls into realm of preponderance of probability where there are many probable factors, some may go in favour of the assessee and some may go against the assessee but the probable factors have to be weighed on material facts so collected in the form of bank statements. Looking to the facts and circumstances of the case and especially the fact that the assessee is a salaried employee having a meager income and the transaction made through banking channels, thus observe that the assessee has used his bank account for the benefit of the prospective buyers of vehicles/implements, his employer only to earn some commission income. Accordingly, delete the addition and allow this ground of appeal. Unexplained investment u/s. 69 - total credit balance in bank account - HELD THAT - On perusal of the bank statement, we observe before making FDR of ₹ 7,00,000/-, the credit balance in the bank account of the assessee was ₹ 7,29,627/-. Hence, the assessee has clearly established that he has credit balance to make the FD of ₹ 7,00,000/-. As regards the FD of ₹ 2,25,000/-, also observed that the father of the assessee has given ₹ 2,10,000/-, which is supported by the affidavit filed by the assessee itself alongwith the bank statement. Accordingly, we direct the AO to delete the addition of ₹ 7,00,000/- and ₹ 2,25,000/- and allow Ground No. 3 of the assessee. Unexplained expenditure - repayment against credit card purchases - HELD THAT - There is no dispute to the fact that the assessee jointly with his wife has obtained a credit card to meet the immediate purchase of different materials in connection with marriage of sister-in-law of the assessee. Accordingly, the wife of the assessee has made purchases by using the credit card. In this connection, ld. A.R. of the assessee referred to marriage invitation card of the sister-in-law solemnized on 12.5.2013. The credit card payment has been made by the assessee after receiving small amount in part from the father -in-law. The Assessing Officer has not disbelieved the purchases and consequent payment in respect of credit card. It is the contention of ld. A.R. of the assessee that since the assessment has been reopened u/s. 147 in the year 2017 and the assessment relates to assessment year 2013-14, it was not possible to collect the details from the CITI Bank towards credit card payment in the year 2017 after pretty long time. It is well settled law that if all payments to credit card was made through bank, then such expenses shall not be treated as unexplained income of the assessee and, no addition shall be made under section 69

Summary

Issues Involved:
1. Confirmation of addition of ?15,29,389/- on account of unexplained money deposited in bank account.
2. Confirmation of addition of ?9,25,000/- as unexplained investment under Section 69 of the Income Tax Act.
3. Confirmation of addition of ?4,07,700/- towards unexplained expenditure.

Issue-wise Detailed Analysis:

1. Confirmation of addition of ?15,29,389/- on account of unexplained money deposited in bank account:
The Assessing Officer (AO) noticed cash deposits totaling ?15,29,389/- in the assessee's bank accounts, which the assessee initially claimed were from cash withdrawals and later attributed to sales from his wife's business. The AO issued notices under Section 133(6) to verify these claims, but found inconsistencies and lack of concrete evidence, leading to the addition of the amount as unexplained cash deposits. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld this addition, noting the assessee's changing statements and lack of evidence. However, upon appeal, it was argued that the deposits were made by prospective buyers of vehicles and subsequently withdrawn to pay the employer. The Tribunal found the explanation plausible, considering the pattern of deposits and withdrawals, and concluded that the bank account was used for business transactions of the employer. Therefore, the addition of ?15,29,389/- was deleted.

2. Confirmation of addition of ?9,25,000/- as unexplained investment under Section 69 of the Income Tax Act:
The AO identified three time deposits totaling ?9,25,000/- and treated them as unexplained investments, as the assessee failed to provide satisfactory evidence for the sources. The CIT(A) upheld this addition. The assessee, however, provided bank statements and affidavits indicating that the deposits were funded by earlier matured deposits, savings, and a gift from his father. The Tribunal verified these documents and found that the assessee had sufficient credit balance to make the investments. Consequently, the Tribunal directed the deletion of the addition of ?9,25,000/-.

3. Confirmation of addition of ?4,07,700/- towards unexplained expenditure:
The AO observed that the assessee paid ?4,07,700/- towards credit card bills and required an explanation for the source of these payments. The assessee stated that the payments were related to purchases made by his wife for her sister's marriage, and the credit card dues were settled with money given by his father-in-law. The CIT(A) confirmed the addition, but the Tribunal found the explanation credible, considering the marriage invitation card and the fact that payments were made through the bank. The Tribunal noted that the AO did not dispute the purchases or the payments. Hence, the addition of ?4,07,700/- was deleted.

Conclusion:
The Tribunal allowed the appeal, deleting all the additions made by the AO and confirmed by the CIT(A), based on the explanations and documentary evidence provided by the assessee. The order was pronounced on 23/07/2021.