2023 (2) TMI 422 - AT - Income Tax

Addition u/s 68 - During course of investigation the DGCEI came across certain bank accounts operated by shroffs in which huge cash was deposited - CIT-A deleted the addition - HELD THAT - CIT(A) has assumed the business of the assessee as shroffs business and from the various documents and evidences presented before us the assessee could not establish that the investment in respect of cash was related to the business of the assessee. The assessee has not appeared before the Assessing Officer and has not filed any details. AR at the time of hearing filed application under Rule 27 thereby supporting the order of the CIT(A) but the CIT(A) has not given detailed finding as to why the said unexplained cash credit should be taken into account when the evidences before the Assessing Officer as well as before the CIT(A) lacks the genuineness creditworthiness of the transactions. Therefore, the CIT(A) was not right in deleting the addition - Decided in favour of revenue.

Summary

Issues:
- Appeal against deletion of addition under Section 68 of the Income Tax Act, 1961 for unexplained cash credit.
- Lack of compliance with notices issued under Section 142 and assessment under Section 144 read with Section 147.
- Justification for deletion of addition without allowing the AO to verify ICICI bank statement.
- CIT(A) assuming business as shroffs business and deletion of addition without establishing the investment's relation to business.
- Similarity in issues across multiple assessment years.

Analysis:
1. The appeals by the Revenue challenged the deletion of additions under Section 68 of the Income Tax Act, 1961, concerning unexplained cash credits. The Assessing Officer made additions due to unexplained cash deposits in the assessee's bank account. The case was reopened under Section 147 as the source of these deposits remained unexplained. Despite notices, no responses were received, leading to assessment under Section 144 read with Section 147.

2. The CIT(A) partly allowed the appeal, prompting the Revenue to challenge the decision. The Revenue argued that the assessee failed to provide evidence or explanations during the assessment proceedings. The CIT(A) justified deletion based on the recovery of Excise Duty, treating it as sales of the Ceramic Unit. However, the Revenue contended that the CIT(A) did not consider the lack of details related to the shroffs business, leading to the rightful addition under unexplained cash credit.

3. The assessee's representative argued that as the assessee did not substantiate commission income claims, taxing the peak balance was appropriate. Citing relevant case law, the representative supported the CIT(A)'s decision. However, upon review, it was found that the CIT(A) did not establish the investment's relation to the business, leading to the deletion being deemed incorrect.

4. The Tribunal found that the CIT(A) assumed the business as shroffs business without proper establishment. The lack of genuineness and creditworthiness in the transactions supported the Revenue's appeal. Despite case laws cited by the assessee's representative, the Tribunal distinguished them from the present case, leading to the allowance of the Revenue's appeals across multiple assessment years.

5. In conclusion, the Tribunal allowed all appeals filed by the Revenue, emphasizing the importance of substantiating claims and establishing the relation of investments to the business for tax purposes.