2022 (2) TMI 423 - AT - Income Tax

Unexplained cash credits in bank accounts - unexplained income of the assessee u/s 69 - Case of the assessee was selected for scrutiny assessment u/s. 143(2) - as argued assessee was a semi-literate person who was earlier running a shop and was presently working with a company as an agent - HELD THAT - We are of the considered view, that the claim of the assessee that the transactions in the assessee s bank account were managed and operated by Shri Jatinder Kumar a travel agent, could not have been summarily brushed aside, and in all fairness, considering the peculiarity of the facts involved in the case before us required a serious consideration on the part of the CIT(A), who we are afraid by loosing sight of the aforesaid material facts pertaining to the assessee, i.e., his limited financial means, family status etc., which prima facie revealed that he had no financial means to have made the aforesaid substantial amount of cash deposits of ₹ 45.50 lac, had in fact hushed through the matter and saddled the assessee with exorbitant taxes. We are of the considered view that the matter requires to be re-examined by the Assessing Officer, who is accordingly directed to carry out necessary verifications as regards the aforesaid claim of the assessee by conducting necessary enquiries from Shri Jatinder Kumar (supra) and from the bank i.e., State Bank of Patiala, Branch Kanak Mandi, Hoshiarpur. Needless to say, the Assessing Officer while disposing off the appeal shall afford a reasonable opportunity of being heard to the assessee, who shall remain at a liberty to substantiate his aforesaid claim on the basis of fresh documentary evidences. We, thus set-aside the matter to the file of the Assessing Officer for the limited purpose of verifying the assessee s claim qua the cash deposits of ₹ 45.50 lac in his saving bank account with State Bank of Patiala, Branch Kanak Mandi, Hoshiarpur. The Grounds of appeal nos. 1 to 3 are allowed for statistical purposes.

Summary

Issues Involved:
1. Sustaining the addition of ?23,13,502/- made by the Assessing Officer.
2. Justification of the CIT(A)'s rejection of the assessee's sworn affidavit.
3. Compliance with the law as laid down by the Hon’ble Supreme Court in CIT vs. P K Noorjahan.
4. General grounds against the order under appeal.

Detailed Analysis:

1. Sustaining the addition of ?23,13,502/- made by the Assessing Officer:
The assessee filed a return of income declaring ?1,59,500/- for Assessment Year 2011-12. During the scrutiny assessment, the Assessing Officer (AO) observed cash deposits of ?45.50 lacs in the assessee's Saving Bank Account. The assessee claimed ignorance about the source of these deposits, attributing them to his friend, a travel agent, who allegedly managed his account to facilitate his visa application to Canada. The AO rejected this explanation, considering it a fabricated story, and added the peak of the cash deposits, ?23,13,052/-, as unexplained income under Section 69 of the Income Tax Act.

2. Justification of the CIT(A)'s rejection of the assessee's sworn affidavit:
The assessee appealed to the CIT(A), submitting an affidavit claiming that his friend managed the bank account. The CIT(A) rejected the affidavit as self-serving and unsubstantiated by corroborative material. The CIT(A) also noted that the assessee did not produce his friend or any supporting statement. Consequently, the CIT(A) upheld the AO's addition of ?23.13 lacs as unexplained income.

3. Compliance with the law as laid down by the Hon’ble Supreme Court in CIT vs. P K Noorjahan:
The assessee's counsel argued that the AO had the discretion not to make an addition under Section 69, citing the Supreme Court's judgment in CIT vs. P K Noorjahan. The Tribunal noted that the prevailing practices in Punjab, where individuals often go to great lengths to facilitate immigration, should have been considered. The Tribunal criticized the CIT(A) for dismissing the affidavit without due consideration and without calling for a remand report to verify the facts from the travel agent and the bank.

4. General grounds against the order under appeal:
The fourth ground of appeal was dismissed as not pressed.

Conclusion:
The Tribunal set aside the matter to the AO for re-examination, directing the AO to verify the assessee's claim by conducting necessary inquiries from the travel agent and the bank. The AO is to provide the assessee with a reasonable opportunity to substantiate his claim with fresh evidence. The appeal was allowed for statistical purposes, and the general ground was dismissed as not pressed. The order was pronounced on 24th December 2021.