2022 (2) TMI 1091 - AT - Income Tax

Addition u/s 68 - unexplained deposit - HELD THAT - Not only the assessee had failed to substantiate the nature of the deposit in his bank account, but even the explanation offered by him is clearly devoid and bereft of any force and cannot be accepted. Although the aforementioned amount had been received by the assessee vide a transfer entry in his bank account from Shri Jail Singh however, in the absence of any explanation as regards the nature of the aforesaid receipt, we find no infirmity in the view taken by the lower authorities who had rightly stamped the same as an unexplained deposit in the hands of the assessee. We, thus, not being able to persuade ourselves to subscribe to the contentions advanced by the ld AR in his attempt to impress upon us that the lower authorities had erred in making the addition as an unexplained deposit in the hands of the assessee, uphold the same.- Decided in favour of assessee.

Summary

Issues:
Appeal against CIT (Appeals) order - Addition u/s 68 - Nature and source of deposits in bank account - Failure to prove creditworthiness - Unexplained income assessment - Appeal before ITAT.

Analysis:
The appeal before the ITAT challenged the CIT (Appeals) order confirming the addition of ?79,50,000 under section 68 of the Income Tax Act. The case revolved around the nature and source of deposits made by the assessee in a bank account, totaling ?1,71,59,223. The Assessing Officer (AO) initiated proceedings under section 147 based on information about these deposits. Despite various claims by the assessee, including receiving money as earnest for a land deal, the AO found the explanations unsubstantiated. The AO rejected the claim, citing lack of supporting evidence and failure to prove the creditworthiness of the source. Consequently, the AO treated the amount as undisclosed income and assessed it accordingly.

During the assessment, the assessee provided conflicting explanations regarding the source of the deposits, involving a land sale agreement and earnest money. However, the lack of documentary evidence supporting these claims led the authorities to reject the explanations. Notably, the assessee failed to provide confirmation or details on how the alleged money was returned. The lower authorities highlighted discrepancies, such as receiving sale consideration from another party on the same date as the alleged earnest money receipt. The ITAT upheld the lower authorities' decision, emphasizing the lack of substantiation for the deposit's nature and supporting the classification of the amount as unexplained.

The ITAT dismissed the grounds of appeal challenging the addition under section 68, as the explanations provided by the assessee were deemed insufficient and lacked credibility. Additionally, a general ground not pressed by the assessee was also dismissed. Ultimately, the ITAT upheld the CIT (Appeals) decision, resulting in the dismissal of the assessee's appeal. The judgment underscores the importance of substantiating claims and proving the source of funds in income tax assessments to avoid classification as undisclosed income.

This detailed analysis of the judgment highlights the key issues, arguments, and outcomes related to the appeal before the ITAT concerning the addition under section 68 of the Income Tax Act.