2022 (3) TMI 307 - HC - Income Tax

Addition u/s 68 - unexplained cash credit - HELD THAT - CIT (A) on studying the bank account carefully found that while ₹ 41 lakhs was deposited on 12th June, 2010 and within two days thereafter there was a debit with the narration TRF to LIC MF Liquid Fund which meant that it had been invested in the above liquid fund and not used for any investment in land or building on behalf of the Assessee s daughter. The fact is that the CIT (A) disbelieved that the Assessee was appointed as the general power of attorney holder for his daughter for entering into land/building transactions on behalf of his daughter. Since the funds were used by the Assessee for his own investment it strongly indicated that the source of investment i.e. the cash deposit of ₹ 41 lakhs also belongs to him. Learned Senior Counsel was unable to overcome the above categorical finding of the CIT(A) on how the cash deposit or ₹ 41 lacs was actually used. The explanation offered by the Assessee raised more questions than it answered. For instance, it was not explained why marriage gifts in a substantial sum of ₹ 25 lacs was kept as cash with the Assessee s daughter. If indeed the daughter maintained a bank account it was but natural that such cash amount would be deposited in such account. The Court is, therefore, not persuaded that any factual or legal error has been committed by the AO, or the CIT (A) or the ITAT in sustaining the above additions under Section 68 of the IT Act. The question framed is therefore, answered in the affirmative i.e. in favour of the Department and against the Assessee.

Summary

Issues:
- Whether the sum of ?41,00,000 belonging to the daughter should be treated as unexplained cash credit under section 68 of the Income Tax Act due to lack of proper documentation and explanation by the Assessee?

Analysis:
The Assessee, in this case, received a notice under Section 143(2) of the Income Tax Act for scrutiny of the unexplained cash deposit of ?41,00,000 in his bank account for the Assessment Year 2011-12. The Assessee claimed that the sum was received from his daughter in the USA for purchasing a house in Bhubaneswar. The daughter provided a declaration supporting this claim, mentioning cash gifts to the Assessee and keeping aside funds for future needs. However, the Assessing Officer was not satisfied and added the amount to the Assessee's taxable income.

The Commissioner of Income Tax (Appeals) dismissed the Assessee's appeal, questioning the credibility of the daughter's claim and the lack of evidence supporting it. The Commissioner highlighted the requirements of Section 68 of the IT Act, emphasizing the need to prove the identity of the creditor, the creditor's capacity, and the genuineness of the transaction. The daughter's capacity to mobilize such a large sum was doubted, leading to the dismissal of the appeal.

The Income Tax Appellate Tribunal (ITAT) concurred with the AO and CIT(A), stating that the explanation provided by the Assessee was implausible, especially considering the daughter's residence outside India and lack of direct bank transactions between her and the Assessee. The ITAT upheld the addition of ?41,00,000 to the Assessee's income.

During the High Court proceedings, the Assessee's explanation regarding the cash deposit and subsequent transactions was found to be unbelievable. The CIT(A) discovered discrepancies in the funds' utilization, indicating that the cash deposit belonged to the Assessee, not his daughter. The Court cited legal precedents emphasizing the need for genuine proof in such cases and upheld the decisions of the lower authorities, dismissing the Assessee's appeal.

In conclusion, the High Court affirmed the additions under Section 68 of the IT Act, ruling in favor of the Department and against the Assessee. The appeal was dismissed, and no costs were awarded, with the interim order being vacated.