2022 (12) TMI 739 - AT - Income Tax

Unexplained cash deposits in Bank account and undisclosed interest income - AR submitted that during the said assessment year, the assessee s son was planning to go to USA for higher education and as per the norms of respective college or university, the student or his parents shall have minimum balance of Rs. 15,00,000/- in the bank account. Therefore, during the year, the assessee started arranging the fund and the same was sourced by loan from bank withdrawal from Provident Fund and Teachers credit society, Gift from father-in-law, Loan from sister-in-law, Gift from wife and remaining balance was managed from his personal savings - HELD THAT - It is pertinent to note that the assessee during the assessment proceedings has explained the reasons for which the assessee collected the cash deposits as well as the arrangement for the money. The assessee submitted evidence related to amount withdrawn from Teachers society which was accepted by the AO. Besides this the confirmations from sister-in-law regarding the loan and gift from father-in - law were also on record. The same were not doubted by the AO. The Gift from wife was also explained by the assessee through bank statements. Regarding personal saving the CIT(A) doubted that the assessee could not save that much amount. But the assessee was working as pharmacist in Government Hospital since 1976 and received salary, therefore, personal saving of a government employee cannot be doubted for several years. Thus, AO as well as the CIT(A) both failed to take cognizance of the evidences produced by the assessee during the assessment proceedings as well as before the CIT(A). The appeal of the assessee is allowed.

Summary

Issues:
1. Validity of notice under section 148 of the Act and order under section 143(3) r.w.s. 147
2. Addition of Rs. 12,70,000/- as unexplained income due to cash deposit
3. Appeal against CIT(A) order confirming the addition

Analysis:

Issue 1:
The appeal challenged the validity of the notice under section 148 of the Act and the order under section 143(3) r.w.s. 147. The appellant contended that the Assessing Officer (AO) erred in law by issuing the notice and passing the order, and requested the returned income to be accepted without the addition made. The return of income was filed initially, and subsequently, the AO received information about cash deposits made by the assessee. The appellant argued against the actions of the AO and sought the deletion of the addition.

Issue 2:
The main contention in this issue was the addition of Rs. 12,70,000/- as unexplained income due to cash deposits made by the assessee during the relevant financial year. The AO had treated these deposits as unexplained income, leading to the addition. The appellant challenged this addition, providing detailed explanations and documentary evidence to support the legitimate sources of the cash deposits. The appellant's arguments included fund arrangements for the son's education, loans, gifts, and personal savings, which were thoroughly explained during the assessment proceedings.

Issue 3:
The appeal was filed against the CIT(A) order that confirmed the addition of Rs. 12,70,000/- as unexplained income. The appellant's representative presented arguments supporting the legitimate sources of the cash deposits, including withdrawals from various sources, loans, gifts, and personal savings. The appellant successfully demonstrated the sources of the funds used for the cash deposits, which were accepted by the Assessing Officer. The Tribunal noted that the evidence provided by the appellant was not adequately considered by both the AO and the CIT(A), leading to the allowance of the appeal and the deletion of the addition.

In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing the importance of considering and acknowledging the evidence presented by the taxpayer during the assessment proceedings. The Tribunal highlighted the legitimate sources of the cash deposits, which were adequately explained and supported by documentary evidence, leading to the deletion of the addition made by the revenue authorities.