2022 (12) TMI 842 - AT - Income Tax

Addition treating cash deposit in bank accounts as income from undisclosed sources u/s 68 - assessee was selected for limited scrutiny through CASS for verification of cash deposits during demonetization period - whether addition has been made on surmises and conjectures without there being any direct material on record? - HELD THAT - Undisputedly, the assessee had withdrawn the amount of Rs. 13,59,000/- and out of this the assessee has stated that a sum of Rs. 3,09,000/- was utilized for domestic needs and rest of the amount was deposited in the bank account. As find that the authorities below have not given any cogent reason for not accepting the explanation offered by the assessee. In the absence of any evidence by the assessing authority that the amount which was available in the form of withdrawals from bank was utilized by the assessee for any other purpose, the addition cannot be sustained. Therefore, hereby direct the Assessing Officer to delete the addition. Grounds raised by the assessee are allowed.

Summary

Issues:
1. Challenge against the initiation, continuation, and conclusion of assessment proceedings under section 143(3).
2. Dispute regarding the addition of Rs. 7,15,000 as income from undisclosed sources under section 68.
3. Allegation of addition based on surmises and conjectures without direct material.
4. Request for consequential relief and legal claim arising from the appeal.

Issue 1: Assessment Proceedings under Section 143(3)
The appeal challenges the assessment proceedings under section 143(3) concerning an amount of Rs. 17,78,840. The assessee contests this action on factual and legal grounds. The case was selected for limited scrutiny to verify cash deposits during the demonetization period. The Assessing Officer did not accept the explanation provided by the assessee regarding the source of cash deposits, leading to the dispute.

Issue 2: Addition under Section 68
The primary contention revolves around the addition of Rs. 7,15,000 as income from undisclosed sources under section 68. The assessee maintained that the cash deposits in bank accounts were fully explainable, sourced from cash withdrawals. However, the authorities, including the Assessing Officer and the CIT(Appeals), upheld the addition, alleging lack of credible evidence supporting the explanation provided by the assessee.

Issue 3: Allegation of Surmises and Conjectures
The appeal asserts that the addition of Rs. 7,15,000 was based on surmises and conjectures without direct material evidence. The authorities allegedly proceeded on an ad hoc basis, lacking credible evidence to substantiate the addition. The assessee emphasized providing supporting evidence for the cash deposits, which was allegedly disregarded by the lower authorities.

Issue 4: Consequential Relief and Legal Claim
The appeal includes a request for consequential relief and legal claims arising from the issues raised in the appeal. It seeks additions, deletions, amendments, or modifications in the grounds of appeal for the interest of substantial justice to the assessee. The Tribunal allowed the appeal, directing the Assessing Officer to delete the addition of Rs. 7,15,000, emphasizing the lack of evidence supporting the disallowance.

In conclusion, the Tribunal's judgment favored the assessee, directing the deletion of the disputed addition based on the lack of cogent reasons for rejecting the explanation provided. The decision highlighted the importance of credible evidence in supporting assessment actions and emphasized the need to substantiate additions with direct material rather than conjectures or surmises.