2021 (9) TMI 625 - AT - Income Tax

Unexplained cash deposits in bank account u/s 69A - time gap between withdrawal and deposits - why the explanation of the assessee that cash deposits in the year under consideration is out of earlier years withdrawals has not been accepted is that keeping huge cash at home for such a long period is beyond any imagination? - HELD THAT - In the instant case, it has been submitted that the cash was withdrawn for the purposes of purchase of another property by the assessee for her son however, the transaction couldn t fructify and as a result, the assessee decided to re-deposit the amount in the bank account. In an ideal situation, such an explanation is expected to be supported by some documentary evidence however, mere absence of supporting documentation cannot be a reason enough to allege any malafide in the explanation so submitted especially where the assessee has explained and duly disclosed the source of deposits in the bank account out of which the withdrawals have been made and has thus established the necessary linkage and availability of cash in hand. The various decisions of the Coordinate Benches cited at the Bar by the ld AR also lays down a broad proposition that mere time gap between withdrawals and deposits cannot be a sole basis for rejecting the explanation of the assessee regarding availability of cash in hand where there is no material that amount so withdrawn has been utilized somewhere else and thus supports the case of the assessee. We believe that there is no justifiable basis to hold that the explanation so furnished by the assessee cannot be accepted and find the explanation so furnished is reasonable, appropriate and satisfactory in the facts and circumstances of the present case and hereby direct the addition so made be deleted. - Decided in favour of assessee.

Issues Involved:
1. Violation of the principle of faceless appeal.
2. Sustaining addition of ?68,95,000/- as unexplained cash deposits under Section 69A of the Income Tax Act.
3. Alleged erroneous and irrelevant findings by the CIT(A) NFAC.
4. Analysis of submissions, materials, and legal evidence by CIT(A) NFAC.
5. Addition made without credible evidence, based on assumptions and presumptions.

Detailed Analysis:

1. Violation of the Principle of Faceless Appeal:
The assessee argued that the CIT(A) NFAC violated the principle of faceless appeal, which is intended to ensure justice for honest taxpayers and to avoid unnecessary litigation. However, the judgment did not elaborate further on this issue, focusing more on the substantive grounds of appeal.

2. Sustaining Addition of ?68,95,000/- as Unexplained Cash Deposits:
The main contention was the addition of ?68,95,000/- as unexplained cash deposits in the bank account under Section 69A of the Income Tax Act. The assessee explained that the cash deposits were made from cash withdrawals from her bank account in previous years, which were intended for purchasing a property for her son. However, due to unforeseen circumstances, the property was not purchased, and the cash was re-deposited. The AO did not accept this explanation, arguing that keeping such a large amount of cash at home for a long period was beyond imagination and not prudent. The CIT(A) upheld the AO's addition, questioning the bonafides of the explanation provided by the assessee.

3. Alleged Erroneous and Irrelevant Findings by the CIT(A) NFAC:
The assessee contended that the CIT(A) NFAC’s findings were erroneous and not based on the assessment order. The CIT(A) was accused of sustaining arbitrary additions, causing harassment and inconvenience to the assessee. The CIT(A) found that the explanation regarding the cash deposits was not credible, as it was unlikely for an individual to forgo interest income by keeping a large amount of cash at home.

4. Analysis of Submissions, Materials, and Legal Evidence by CIT(A) NFAC:
The assessee argued that the CIT(A) NFAC failed to analyze the submissions, materials, and legal evidence in the right perspective and judicial manner. The CIT(A) dismissed the explanation that the cash deposits were from earlier withdrawals, stating that the redeposited cash was transferred to other parties through cheques/RTGS, making the explanation seem non-bonafide.

5. Addition Made Without Credible Evidence, Based on Assumptions and Presumptions:
The assessee claimed that the addition was made without credible evidence and was based on assumptions and presumptions. The AO’s assertion that the assessee had already invested in a property worth ?1,27,20,200/- was challenged as factually incorrect. The assessee provided a detailed cash flow statement showing withdrawals and deposits, arguing that the AO failed to bring any contrary material evidence to justify the addition.

Judgment:
The tribunal found that the assessee had sufficiently explained the source of the cash deposits with legal and valid documentary evidence. The sale of the property and the subsequent cash withdrawals were duly recorded and disclosed in the tax filings. The tribunal noted that the AO had not disputed the cash withdrawals but rejected the explanation based on the improbability of keeping large amounts of cash at home. The tribunal emphasized that the absence of supporting documentation alone could not justify rejecting the explanation, especially when the source of deposits was clearly demonstrated.

The tribunal cited various precedents supporting the principle that mere time gaps between withdrawals and deposits could not be a sole basis for rejecting the explanation regarding the availability of cash in hand. The tribunal concluded that the explanation furnished by the assessee was reasonable, appropriate, and satisfactory, directing the deletion of the addition made by the AO.

Conclusion:
The appeal filed by the assessee was allowed, and the addition of ?68,95,000/- made by the AO was deleted. The tribunal emphasized the importance of considering the reasonableness of the explanation provided by the assessee and the necessity of credible evidence before making additions based on assumptions and presumptions.

← Previous Next →