2022 (11) TMI 820 - AT - Income Tax

Addition u/s 69A - cash deposited in the bank - income from undisclosed sources which was deposited in the bank account and the same is treated as unexplained cash deposit u/s 69A - HELD THAT - As we note that assessee has duly explained before the AO that amount withdrawn from the bank was redeposited after a lapse of very few days in the same bank. In my considered opinion, authorities below are not justified in disallowing the small sum of Rs.75,000/-. CIT (A) in fact has not applied any mind and he has only harped upon that the assessee had not appeared before him. The assessee had sufficient income and has duly withdrawn the amount from the bank and the same was redeposited. Hence, in my considered opinion, orders of the authorities below are not sustainable and accordingly, the same are set aside and the issue is decided in favour of the assessee.

Summary

Issues:
Appeal against NFAC order for AY 2017-18, Addition of Rs.75,000 as unexplained cash deposit.

Analysis:
1. The appeal was against the NFAC order for the assessment year 2017-18. The grounds of appeal challenged the CIT (A)'s order as bad in law and against natural justice. The Assessing Officer had made an addition of Rs.75,000 on account of cash deposited in the bank. The assessee explained the cash withdrawal and redeposit but failed to comply with the AO's request for clarification.

2. The AO proceeded to treat the unexplained cash deposit of Rs.75,000 as income from undisclosed sources under section 69A of the Income-tax Act, 1961, due to the lack of explanation and non-cooperation from the assessee. Penalty proceedings were initiated under section 271AAC(1) of the Act. The CIT (A) upheld the AO's order, emphasizing the assessee's non-appearance and lack of explanation, leading to the sustained addition of Rs.75,000.

3. The ITAT Delhi, upon hearing the Revenue and reviewing the records, noted the assessee's explanation that the withdrawn amount was redeposited in the same bank shortly after. The tribunal found the authorities' disallowance of the Rs.75,000 unjustified, as the assessee had sufficient income, withdrew and redeposited the amount. The tribunal concluded that the orders of the lower authorities were unsustainable, setting them aside and deciding in favor of the assessee.

4. The tribunal allowed the assessee's appeal, overturning the additions made by the lower authorities. The decision was based on the assessee's explanation and the lack of justification for treating the cash deposit as undisclosed income. The judgment highlighted the importance of providing adequate opportunities for the assessee to explain and the need for authorities to consider all relevant facts before making additions based on assumptions.