2022 (5) TMI 170 - AT - Income Tax

Unexplained cash credit under the provisions of section 68 - difference in time between the cash deposited in the bank viz a viz cash received as gift - HELD THAT - We find that there was no contrary evidence brought on record by the revenue suggesting that the amount of cash deposit is not out of the gift amount - the revenue has not brought anything on record in support of its contention that amount deposited by the assessee is not out of the cash gift. To our understanding, merely the difference in time between the cash deposited in the bank viz a viz cash received as gift cannot authorize the revenue authorities to draw inferences against the assessee until and unless some documentary evidence are brought on record contrary to the arguments of the learned AR for the assessee. Admittedly, it is very unusual that a wealthy NRI is accepting the gift from his father and the brother. Generally, the practice is different in the society. As such the NRI make gift to the relatives. But we find that there is no prohibition for the NRI for accepting the gifts from the relatives. In the absence of any prohibition, no adverse inference can be drawn against the assessee based on the prevailing system in the society. It is also interesting to note that the assessee has furnished sufficient documentary evidence of his father and the brother to justify the income in their hands from the activity of agricultural. But none of the authority below has made any cross verification from the concern parties in order to bring out the truth on the surface. To our understanding, the AO before drawing any adverse inference against the assessee, should have cross verified from the donors by issuing notice under section 133(6)/131 - we hold that no adverse inference can be drawn against the assessee by holding that the amount of cash deposited by the assessee in his bank represents the unexplained cash credit under section 68 - Accordingly we set aside the finding of the learner CIT-A and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed.

Summary

Issues:
1. Lack of jurisdiction in assessment order passed.
2. Addition of unexplained cash credit.

Analysis:

Issue 1: Lack of jurisdiction in assessment order passed
The assessee contended that the Assessing Officer (AO) lacked jurisdiction as the appellant was a Non-Resident Indian for the relevant assessment year. The appellant argued that the AO assumed jurisdiction erroneously, which was confirmed by the Commissioner of Income Tax (Appeals) without considering the factual and material evidence provided. The appellant's jurisdictional challenge was not adjudicated upon by the authorities. The appellant requested the tribunal to declare the order as legally flawed. However, the tribunal did not delve into this issue as it was not deemed necessary for the final decision.

Issue 2: Addition of unexplained cash credit
The main issue raised by the assessee was the addition of Rs. 11,44,000 as unexplained cash credit under section 68 of the Income Tax Act. The assessee, a Non-Resident Indian residing in New Zealand, received cash deposits in his bank account, the source of which was not explained. The AO treated this amount as unexplained cash credit. The assessee claimed that the cash was received as a gift from his father and brother, who were engaged in agricultural activities in India and had the capacity to gift the amount. The assessee submitted documentary evidence, including cash book, profit and loss account, 7/12 extract, and gift deed to prove the genuineness of the transaction and creditworthiness of the donors.

The Commissioner of Income Tax (Appeals) (CIT-A) called for a remand report from the AO, who contended that the cash deposits did not match the dates of the gifts received, raising doubts about the source of the deposits. The assessee rectified the error in the gift deed and provided explanations for the discrepancies. The CIT-A, however, raised concerns about the donors' capacity to gift such amounts and the contradictions in the gift deed.

The tribunal, after considering the submissions and evidence, noted that the assessee had discharged the onus of proving that the cash deposits were from the gifts received. The tribunal emphasized that the revenue failed to provide contrary evidence to disprove the assessee's contentions. It was highlighted that the AO should have cross-verified with the donors before drawing adverse inferences. As a result, the tribunal set aside the CIT-A's decision and directed the AO to delete the addition of unexplained cash credit. The tribunal also dismissed the technical issue regarding the validity of the assessment as it became irrelevant after deciding the main issue in favor of the assessee.

In conclusion, the tribunal partially allowed the appeal filed by the assessee, emphasizing the importance of providing and verifying documentary evidence in tax assessments to ensure fair treatment of taxpayers.