2023 (1) TMI 852 - AT - Income Tax

Addition u/s 68 - information received in IDS system that the assessee has made huge cash deposit in her bank account - HELD THAT - Assessee vehemently tried to justify that the assessee was having sufficient cash balance of Rs. 6,75,000/- on 16/06/2009. Assessee has received a gift of Rs. 3.50 lacs from her bother in law. To substantiate the genuineness of such gift, assessee filed confirmation of donor. In the confirmation, the donor has confirmed that such gift was given to assessee to meet out the education expenses of her daughter in law. AO has not investigated fact independently before disallowing the claim of Gift from close relative. Considering the confirmation of the donor we allow the Gift as genuine. So far as other deposits and withdrawal of cash is concerned, the explanation given by the assessee does not inspire confidence, as the assessee on one hand took stand that the money was deposited for the education of her daughter in law and on other hand that her son was remitting money to her. However, still keeping in view the age, status and family back ground of the assessee, further allow benefit of doubt of Rs. 2.00 lacks, which the assessee may have received from her close relative and other family member on various occasions. Thus, the assessee is given further relief of 5.50 lacks and remaining addition of Rs. 4,88,785/- (10,38,785 5,50,000) is upheld. In the result, the original ground No.1 of the appeal is partly allowed.

Summary

Issues Involved
1. Validity of reopening under Section 147/148 of the Income Tax Act.
2. Justification of cash deposits as unexplained income.
3. Acceptance of gifts as genuine sources of income.

Detailed Analysis

1. Validity of Reopening under Section 147/148
The assessee challenged the reopening of the assessment on multiple grounds including lack of nexus between reasons recorded and belief formed as to escapement of income, reopening based on borrowed satisfaction, and absence of sanction from the Chief Commissioner as the reopening was beyond four years. The Tribunal noted that the assessee did not raise these objections at the time of filing the appeal before the CIT(A) and did not provide any new facts that were not already on record. Consequently, the Tribunal did not admit these additional grounds for adjudication, thereby rejecting the challenge to the validity of the reopening.

2. Justification of Cash Deposits as Unexplained Income
The main contention was the addition of Rs. 11,20,785/- as unexplained income. The Assessing Officer (AO) initiated proceedings based on information about cash deposits in the assessee's bank account and issued a notice under Section 148. The assessee responded by filing a return of income and provided explanations including agricultural income, dairy farming income, and gifts from relatives. However, the AO found these explanations insufficient and added the entire amount as unexplained income.

The CIT(A) partially accepted the assessee's explanation, allowing a cash deposit of Rs. 82,000/- but upheld the addition of Rs. 10,38,785/-. The Tribunal further examined the assessee's explanations and found that while the assessee provided some evidence, it was not entirely convincing. However, considering the age, status, and family background of the assessee, the Tribunal allowed an additional relief of Rs. 5,50,000/-, reducing the unexplained income to Rs. 4,88,785/-.

3. Acceptance of Gifts as Genuine Sources of Income
The assessee claimed to have received a gift of Rs. 3.50 lacs from her brother-in-law to finance her daughter-in-law's education abroad. The AO did not accept this gift as genuine due to lack of supporting evidence. The CIT(A) upheld this view, noting the absence of evidence about the donor's capacity to make such a gift. However, the Tribunal considered the notarized confirmation from the donor and allowed the gift as genuine. Additionally, the Tribunal provided further relief by considering possible other small gifts from close relatives, thereby granting a total relief of Rs. 5.50 lacs.

Conclusion
The Tribunal partly allowed the appeal, reducing the unexplained income from Rs. 10,38,785/- to Rs. 4,88,785/- after considering the assessee's explanations and additional reliefs. The objections against the validity of reopening were not admitted due to procedural lapses by the assessee. The judgment emphasizes the importance of providing convincing evidence and following procedural requirements in tax assessments.