2022 (9) TMI 465 - AT - Income Tax

Unexplained cash deposits - cash withdrawn was utilized / used for some other purpose - HELD THAT - CIT(Appeals) has not erred in facts and in law in coming to the conclusion that there is a reasonable presumption that once there are substantial withdrawals from the bank account, then in the absence of the Department being able to establish that such withdrawals were utilised by the assessee elsewhere, it can be reasonably presumed that the same were re-deposited in the bank account. Therefore, in our considered view, Ld. CIT(Appeals) has not erred in facts and in law in deleting the aforesaid addition on account of unexplained cash deposits. Decided in favour of assessee. Addition on account of unexplained expenditure under section 69C - HELD THAT - Punjab and Haryana High Court in the case of CIT v V.P. Singh 2013 (11) TMI 18 - PUNJAB AND HARYANA HIGH COURT held that where assessee had submitted balance-sheet before Assessing Officer and in balance-sheet closing balance or cash in hand was disclosed and entries in balance-sheet had not been disputed by Assessing Officer, opening balance could not be regarded to be undisclosed income. In the case of ITO Vs Rahul kantilal Shah 2022 (9) TMI 375 - ITAT MUMBAI ITAT held that addition on the basis of the opening balance of unsecured loan treating the same as current year transaction by invoking section 68 of the Income Tax Act is unsustainable - CIT(Appeals) has not erred in facts and in law in allowing part relief to the assessee which is the opening cash balance as on 1st April 2001, on the ground that the same could not be considered as income for the impugned year under consideration. Decided in favour of assessee. Addition u/s 40A(3) disallowing 20% for advances given for purchase of land - assessee contended that since no expenditure has been claimed by the assessee, the provisions of 40A(3) of the Act cannot be invoked - HELD THAT - CIT(Appeals) has correctly applied the law that for the purpose of invoking provisions of section 40A(3) of the Act, it is a prerequisite that expenditure should have been claimed by the assessee. In the instant facts, admittedly, no expenditure was claimed by the assessee in respect of the amount for advances given for purchase of land. Accordingly, Ld. CIT(Appeals) has not erred in facts or law in deleting the additions which were made by invoking provisions of section 40A(3) of the Act. - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of addition on account of unexplained cash deposits in the banks.
2. Deletion of addition on account of unexplained expenditure under section 69C of the Income Tax Act.
3. Deletion of addition made under section 40A(3) of the Income Tax Act.
4. Admission of additional evidence by the CIT(Appeals).

Issue-wise Detailed Analysis:

Admission of Additional Evidence by CIT(Appeals):

The Department challenged the CIT(Appeals) for admitting additional evidence, arguing that the assessee did not cooperate during the assessment stage. The Tribunal found no merit in this ground, noting that ITAT Ahmedabad had earlier set aside the initial CIT(Appeals) order to allow fresh adjudication after giving the assessee a reasonable opportunity to be heard. The Tribunal emphasized that the CIT(Appeals) followed due process by calling for the AO's comments on the additional evidence in the remand report. Citing precedents from the Gujarat High Court, the Tribunal concluded that the CIT(Appeals) did not err in permitting the additional evidence. Thus, the additional grounds of appeal were dismissed.

Deletion of Addition on Account of Unexplained Cash Deposits:

The AO added Rs. 27,59,700/- as unexplained cash deposits, alleging that the assessee did not explain the source of these deposits. The CIT(Appeals) observed that these deposits were from cash withdrawals from the same bank accounts, which were verified through bank statements provided as additional evidence. The Tribunal upheld this view, referencing multiple ITAT decisions that support the presumption that cash withdrawals can be re-deposited unless the AO provides evidence to the contrary. Consequently, the CIT(Appeals) was found justified in deleting the addition of Rs. 27,59,700/-.

Deletion of Addition on Account of Unexplained Expenditure under Section 69C:

The AO added Rs. 4,28,00,000/- as unexplained expenditure under section 69C, questioning the genuineness of land advances. The CIT(Appeals) provided partial relief by acknowledging Rs. 3,55,73,880/- as the opening cash balance, which could not be added to the income of the year under consideration. The remaining amount was added due to lack of explanation from the assessee. The Tribunal upheld the CIT(Appeals) decision, noting that the opening balance could not be considered income for the impugned year. Thus, the addition of Rs. 3,55,73,880/- was rightly deleted.

Deletion of Addition Made under Section 40A(3):

The AO disallowed Rs. 85,60,000/- under section 40A(3), claiming it was 20% of the land advances. The CIT(Appeals) deleted this addition, reasoning that section 40A(3) applies only when expenditure is claimed, which was not the case here. The Tribunal agreed, emphasizing that the provision could not be invoked as no expenditure was claimed by the assessee. Therefore, the deletion of Rs. 85,60,000/- was upheld.

General Grounds:

Grounds 4 and 5 were deemed general and did not require specific adjudication.

Conclusion:

The Tribunal dismissed the Department's appeal, upholding the CIT(Appeals) decisions on all contested grounds. The judgment emphasized procedural fairness, adherence to legal precedents, and the necessity of evidence-based conclusions. The order was pronounced in open court on 31-08-2022.