2022 (9) TMI 1020 - AT - Income Tax

Reopening of assessment u/s 147 - Addition u/s 68 - unexplained deposits in bank account - HELD THAT - This is a case where, although, the assessee did not file any kind of confirmation nor could explain, with evidence, the source of entries appearing in his bank statement, his case requires a sympathetic view. Accordingly, without going into the question of the validity of the reopening or the question of the legality of the impugned addition u/s 68 on peculiar facts of the case, hold that the impugned addition is not sustainable. While reaching this conclusion, the consideration which has weighed in favour of the assessee is the fact that he is a small time tea and pakoda seller and he could not have been expected to grasp intricacies of Income Tax Law. The deposits in the bank account are also on two dates only, as is evident from the assessment order, and it also lends credence to the version of the assessee that the amount had been deposited with a purpose to deposit the same towards margin money for the auction. Amounts were also withdrawn immediately within a short period of time in cash, apparently, when the auction did not took place. Next, is the impossibility of obtaining confirmation of Mr. Diwakar Chaurdhary at this stage as he has already passed away. As reached the conclusion that the assessee s case deserves that a sympathetic view may be taken - the assessment order was also passed exparte qua the assessee as the assessee had furnished the reply before the wrong AO. Restoring, the issue back either to the CIT(A) or the AO also would not serve any purpose as Mr. Diwakar Chaudhary, who would have been in a position to confirm the transaction, has already passed away. Therefore, looking into smallness of amount, the status of the assessee as well as the various facts as mentioned in the preceding paragraphs and without going into question of legality of reopening or legality of addition made under section 68, purely on facts, we set aside the order of the Ld. CIT(A) and direct the AO to delete the addition. Appeal of the Assessee is allowed.

Summary

Issues Involved:
1. Reopening of assessment under section 147/148 based on cash deposits in bank account.
2. Addition under section 68 of the Income Tax Act for unexplained cash deposits.

Analysis:

Issue 1: Reopening of assessment under section 147/148 based on cash deposits in bank account:
The case involves an appeal by the assessee against the order of the Ld. CIT(A)-2, Chandigarh pertaining to Assessment Year 2010-11. The Income Tax Department received information about cash deposits of Rs. 15,02,000 in the assessee's bank account. The AO invoked section 68 of the Income Tax Act, 1961, adding the amount to the assessee's income as unexplained. The assessee contended that the cash was received from a family friend for an auction bid, but failed to provide sufficient evidence. The Ld. CIT(A) upheld the addition due to lack of evidence from the family friend. The Tribunal considered the reopening of assessment and the legality of the addition under section 68.

Issue 2: Addition under section 68 of the Income Tax Act for unexplained cash deposits:
The assessee challenged the addition under section 68, arguing that bank passbooks are not recognized as books of account. The AO and Ld. CIT(A) found the explanation unsatisfactory due to lack of evidence and contradictory facts in the assessment order. The Tribunal noted discrepancies in the assessment process, including the assessee not being afforded proper opportunities and the assessment being passed ex parte. The Tribunal acknowledged the unique circumstances of the case, where the assessee, a small tea and pakoda seller, lacked understanding of tax laws. Considering the impossibility of obtaining confirmation from the deceased family friend, the Tribunal set aside the Ld. CIT(A)'s order and directed the AO to delete the addition under section 68.

In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing the need for a sympathetic view based on the peculiar facts of the case. The judgment highlights the importance of considering individual circumstances and practical challenges faced by taxpayers, especially those with limited knowledge of tax laws.