2022 (4) TMI 852 - AT - Income Tax

Addition u/s 68 - No explanation and evidences furnished in support of the credits in the Bank Accounts - HELD THAT - Once, the authorities have accepted fact that the assessee is into business of purchase and sale of used cars, then they must have examined claim of the assessee that cash deposits found in bank account is out of advance received from customers for sale of used cars. No doubt, the assessee has taken a different stand at different levels, but learned A.R for the assessee has explained reasons for taking different stand as per which, the assessee s father was ill during the relevant time and the assessee could not explain his case before the Assessing Officer with necessary evidences. Therefore, the learned A.R for the assessee has requested to give one more opportunity of hearing to explain his case before the AO. We find that when the authorities below does not disbelieve claim of the assessee that he was into business of purchase sale of used cars, then they must have examined claim of the assessee that cash deposits found in bank accounts is out of advance received from customers. Since, both the authorities have failed to examine claim of the assessee, we are of the considered view that the issue needs to go back to the file of the Assessing Officer to give one more opportunity of hearing to the assessee to justify his case. Hence, we set aside order of the learned CIT(A) and restore the issue back to the file of the Assessing Officer and direct the Assessing Officer to re-examine claim of the assessee - Assessee appeal allowed for statistical purposes.

Summary

Issues:
1. Condonation of delay in filing appeal.
2. Addition of unexplained cash deposits under Section 68 of the Income Tax Act.
3. Treatment of net profit from business of purchase and sale of used cars.

Condonation of Delay in Filing Appeal:
The appellant sought condonation of a 35-day delay in filing the appeal due to the appellant's illness and doctor's advice to rest for six weeks. The appellant argued that the delay was unintentional and requested condonation in the interest of substantial justice. The respondent opposed the condonation, claiming the reasons were not reasonable. The Tribunal, after considering the reasons, found them to be reasonable and condoned the delay, admitting the appeal for adjudication.

Addition of Unexplained Cash Deposits:
The appellant, engaged in bakery and used car business, declared income for the assessment year 2011-12. The Assessing Officer noted significant cash deposits in bank accounts and sought explanations. The appellant attributed the deposits to loans from friends/relatives, but the Assessing Officer found the explanation insufficient and added the amount under Section 68. In the appeal, the appellant argued the deposits were advances from car buyers. The CIT(A) upheld the addition but directed setting off part of it against the admitted business income. The Tribunal, noting the appellant's business activities, remanded the issue to the Assessing Officer for a fresh examination of the source of cash deposits.

Treatment of Net Profit from Business:
The appellant contested the addition of cash deposits under Section 68, claiming they were business receipts. The Tribunal observed that the authorities accepted the appellant's used car business but failed to adequately consider the source of cash deposits. Due to the appellant's explanation for the differing stands taken, the Tribunal remanded the issue to the Assessing Officer for a fresh assessment, providing the appellant with an opportunity to justify the source of cash deposits. The Tribunal set aside the CIT(A)'s order and directed a re-examination of the issue.

In conclusion, the Tribunal allowed the appeal for statistical purposes, remanding the issues of unexplained cash deposits and treatment of net profit from the used car business back to the Assessing Officer for fresh examination and consideration in accordance with the law.