2022 (5) TMI 733 - AT - Income Tax

Unexplained Investment u/s 69 as taxed u/s 115BBE - cash withdrawal from City Union Bank account is more than amount of cash deposited in the very same bank account - time gap of more than 3 to 5 days between cash withdrawal and cash deposits - evidence to prove that cash withdrawal has been used for some other purposes - HELD THAT - Once the AO never disputed fact that cash withdrawal from bank account is higher than amount of cash deposited into bank account, then the A.O. ought not to have made additions towards cash deposits into bank account only for the reason that there is time gap of more than 3 to 5 days between cash withdrawal and cash deposits from very same bank account. It was not the case of the AO that cash withdrawal from bank account on earlier occasion had been spent by the assessee or used for some other purposes. In absence of any finding contrary to explanation of the assessee that cash deposits into bank account is out of withdrawal from earlier occasion cannot be disregarded. CIT(A), without appreciating above facts has simply confirmed additions made by the Assessing Officer. Hence, we reverse findings of the learned CIT(A) and direct the Assessing Officer to delete additions made towards cash deposits into City Union Bank account u/s.69 - Decided in favour of assessee.

Summary

Issues Involved:
1. Jurisdiction of the Assessing Officer.
2. Addition under Section 69 of the Income Tax Act, 1961, towards cash deposits into the bank account.
3. Levy of interest under Section 234B of the Income Tax Act, 1961.

Detailed Analysis:

1. Jurisdiction of the Assessing Officer:

The appellant contested the jurisdiction of the Assessing Officer (AO), arguing that as a Director of M/s. S V Global Mill Ltd, the appellant should be assessed by the Jurisdictional Officer of the said company as per the Circular issued by CBDT. The appellant claimed that the assessment order passed by the Income Tax Officer, Non-Corp Ward-1(4), Chennai, was without jurisdiction and deserved to be set aside.

However, the Commissioner of Income Tax (Appeals) [CIT(A)] rejected this argument, stating that the AO exercised jurisdiction as per the notification issued by the Principal Commissioner of Income Tax. The CIT(A) noted that the case was transferred to the Income Tax Officer Non-Corp Ward-1(4), Chennai, through a notification dated 11.11.2019, and the appellant was informed about the change in incumbency via a notice under Section 129 of the Income Tax Act, 1961. Consequently, the CIT(A) dismissed the ground of appeal concerning the jurisdiction.

2. Addition under Section 69 of the Income Tax Act, 1961:

The appellant made cash deposits totaling Rs.1,17,38,500/- and cash withdrawals totaling Rs.2,19,59,800/- during the assessment year 2017-18. The AO accepted the withdrawals as sources for the cash deposits made within a reasonable time from the withdrawals but treated the balance cash deposits totaling Rs.70,27,500/- as unexplained investment under Section 69.

The appellant contested this addition, arguing that the AO erred in making the addition merely because there was a time gap between the withdrawal of cash and cash deposits. The appellant claimed that the source for the cash deposits was out of cash withdrawals from the same bank account.

The CIT(A) upheld the AO's decision, stating that the appellant did not explain the nature of the cash deposits or the purpose of the cash withdrawals and failed to link the cash withdrawn from the bank to the cash deposits. The CIT(A) cited a decision from the Hon'ble High Court of Punjab and Haryana, which held that if the appellant was unable to link cash withdrawn from the bank to cash deposits, the same would be considered unexplained income.

However, upon further appeal, the Tribunal reversed the findings of the CIT(A). The Tribunal noted that the AO did not dispute the fact that cash withdrawals from the bank account exceeded the cash deposits. The Tribunal held that the AO ought not to have made additions towards cash deposits into the bank account only because there was a time gap of more than 3 to 5 days between cash withdrawals and deposits. The Tribunal emphasized that the AO did not provide any evidence to support the claim that the withdrawn cash was used for other purposes. Consequently, the Tribunal directed the AO to delete the additions made towards cash deposits into the City Union Bank account under Section 69.

3. Levy of Interest under Section 234B of the Income Tax Act, 1961:

The appellant also contested the levy of interest under Section 234B of the Income Tax Act, 1961, which was consequential to the addition made by the AO. However, since the Tribunal directed the deletion of the additions made towards cash deposits, the issue of levying interest under Section 234B became academic and was not adjudicated separately.

Conclusion:

The Tribunal allowed the appeal filed by the assessee, directing the deletion of additions made towards cash deposits into the bank account under Section 69 of the Income Tax Act, 1961. The issue of jurisdiction of the AO was dismissed as infructuous since the main issue on merits was decided in favor of the assessee. The order was pronounced in the open court on 11th May 2022.