2022 (10) TMI 31 - AT - Income Tax

Addition u/s 68 - Unexplained cash deposits made in a bank account of the appellant - HELD THAT - In the present case, the assessee has admitted that a cash totaling was deposited to his bank account during the year under consideration, but the assessee could not explain the nature and source of the cash deposited in the bank account. As per the list of the investors provided by the assessee, out of 280 persons as many as 89 persons to whom enquiry letters were issued by the A.O have denied having any transaction with the assessee and the remaining persons have either not replied to the letters issued to them or returned unserved to the A.O. Even in the second round after the remand, the assessee has provided the very same details and old addresses of the parties but the assessee has not able to provide the identity, creditworthiness and genuineness of the transaction. Since the assessee has miserably fail to prove the case of the assessee even after providing the opportunity by the Tribunal. As relied by the assessee are concerned, in the present case, there is no material to show that the assessee is a merely an entry operator and the amount has been later transferred to the actual owners and in view of the fact that assessee could not prove the transaction by getting confirmation from the respective investors and in the absence of proving the subsequent cash flow, the judgments relied by the AR are not applicable to the present case. - Decided against assessee.

Summary

Issues Involved:
1. Dismissal of appeal without proper opportunity of hearing.
2. Addition under Section 68 of the Income Tax Act for cash deposits in the assessee's bank account.

Detailed Analysis:

1. Dismissal of Appeal Without Proper Opportunity of Hearing:
The assessee contended that the Learned CIT(A) erred in law and on facts by dismissing the appeal without allowing a proper opportunity of hearing. This issue was raised for all three assessment years (2005-06, 2006-07, and 2007-08). The appellate order of appeal dismissal in a summary manner was challenged, and the assessee sought the quashing of such orders.

2. Addition Under Section 68 of the Income Tax Act for Cash Deposits:
The primary issue across all three appeals was the confirmation of additions under Section 68 of the Income Tax Act for cash deposits made in the assessee's bank account. The amounts in question were Rs. 1,07,64,950/- for A.Y. 2005-06, Rs. 3,86,90,400/- for A.Y. 2006-07, and Rs. 18,50,000/- for A.Y. 2007-08.

A. Assessee's Argument:
The assessee argued that he acted merely as a broker or facilitator for other investors, channeling their money through his bank account to various companies. The shares were issued to the actual investors, not the assessee. The assessee claimed no personal benefit from these transactions, including commission. It was also highlighted that the predecessor of the CIT(A) recommended assessing only a percentage of the cash deposits as the assessee's income. Despite submitting confirmations from intermediary companies and other evidence, the assessee contended that these were ignored by the authorities.

B. Department's Argument:
The Department maintained that the assessee failed to substantiate the identity, genuineness, and creditworthiness of the investors. The cash deposits remained unexplained, leading to their treatment as income from other sources. The Department emphasized that the assessee did not produce any documents to support his claims before the A.O. or the CIT(A).

C. Tribunal's Findings:
The Tribunal noted that the assessee admitted to cash deposits totaling Rs. 1,07,64,950/- in his bank account but failed to explain their nature and source. The assessee's claim of acting on behalf of his brother-in-law and earning a 1% commission was not substantiated with evidence. The Tribunal emphasized that under Section 68, it is the assessee's responsibility to explain the nature and source of cash credits. The Tribunal referenced the case of Sreelekha Banerjee Vs. CIT, highlighting that the burden of proof lies with the assessee.

The Tribunal found that out of 280 investors, 89 denied any transaction with the assessee, and the remaining did not respond or the letters were returned unserved. The assessee failed to provide credible evidence of the identity, creditworthiness, and genuineness of the transactions. The judgments cited by the assessee were deemed inapplicable due to the lack of material evidence showing that the assessee was merely an entry operator.

Conclusion:
The Tribunal dismissed the appeals for all three assessment years, upholding the additions made under Section 68 of the Income Tax Act. The assessee's grounds of appeal were found to lack merit, and the orders of the CIT(A) were affirmed.

Order:
The appeals in ITA No. 3377/Del/2019, ITA No. 3378/Del/2019, and ITA No. 3379/Del/2019 were dismissed. The order was pronounced in the open court on 29/09/2022.