2023 (3) TMI 214 - AT - Income Tax

Unexplained cash deposit to the bank account - identity of creditor/donor, the capacity of the creditor/donor only to advanced money and genuiness of the transaction, which not at all proved - HELD THAT - We agree with the contention of the AR that the amount of Rs. 9 lakh depotised by the assessee to his bank account was from the amount withdrawn by the sister of assessee from her bank account on the very same date i.e. 17.02.2011, therefore the source of first deposit is properly explained and copy of PAN and affidavit along with confirmation given by sister of assessee Smt. Jyoti Rathi again confirm the fact that she has having PAN number and bank account which shows her identity, capacity and creditworthiness and genuineness of transaction of gift to his brother that is assessee. Regarding second deposit from the copy of passbook of father of assessee Shri Ganshyam Dass Rathi reveals that the father of assessee has withdrawn Rs. 5 lakh on 01.03.2011 from his bank account maintained with Corporation Bank and on the very same date the same amount was deposited by the assessee to his bank account. The copy of bank passbook, Aadhar Card, affidavit and confirmations of gift given by the father of assessee Shri Ganshyam Dass Rathi clearly reveals the identity capacity and creditworthiness and genuineness of transaction of gift from the father to son therefore no addition is called for in the hands of assessee on this account. The copy of ITR acknowledgment of Smt. Jyoti Rathi and copy of ITR acknowledgment of Shri Ganshyam Dass Rathi clearly reveals that these persons filing Income Tax Return with the Department therefore their identity cannot be doubted. We are inclined to hold that the assessee has successfully demonstrated and substantiated the source of cash deposit to his bank account therefore no addition is called for in this regard therefore grounds of assessee on merits are allowed and the AO is directed to delete the addition. Appeal of the assessee allowed.

Issues Involved:
- Validity of assessment under section 147/143(3) of the Act
- Reopening action under section 148 and reasons recorded for reopening
- Existence of relevant material for forming "Reason to Believe"
- Addition of Rs. 14,00,000 as unexplained cash credit under section 69A
- Source of cash deposits in bank accounts and substantiation by the assessee

Analysis:

Validity of Assessment under Section 147/143(3) of the Act:
The appeal challenged the order of assessment dated 11.07.2022 by the Ld. NFAC, New Delhi, for Assessment Year 2011-12. The appellant raised multiple grounds of appeal questioning the legality and factual correctness of the assessment under section 147/143(3) of the Act. The appellant contended that the assessment was flawed, incorrect on facts, and contrary to principles of natural justice.

Reopening Action under Section 148 and Reasons Recorded:
The appellant contested the reopening action under section 148, highlighting that the reasons recorded for reopening the assessment lacked essential details on crucial issues such as the contents of information available to the Assessing Officer and the treatment of mere cash deposits as income escaping assessment. The appellant argued that the reopening was sustained without addressing these vital issues.

Existence of Relevant Material for Forming "Reason to Believe":
The appellant further challenged the initiation of proceedings under section 147, arguing that the Assessing Officer incorrectly held that there was relevant material supporting the formation of the requisite "Reason to Believe." The appellant contended that the basis for initiating proceedings was unsubstantiated and lacked proper justification.

Addition of Unexplained Cash Credit under Section 69A:
The appellant objected to the addition of Rs. 14,00,000 as unexplained cash credit under section 69A of the Act. The appellant argued that the assessment order focused on aspects like the identity of the creditor/donor, their capacity to advance money, and the genuineness of transactions, which were not the main elements of section 69A. The appellant emphasized discrepancies in the assessment approach and the need for a more thorough analysis.

Source of Cash Deposits and Substantiation by the Assessee:
The core issue revolved around the source of cash deposits totaling Rs. 14,00,000 in the bank accounts of the assessee. The appellant provided detailed evidence, including bank statements, IT documents, and confirmation letters of gifts from family members, to support the claim that the cash deposits were legitimate and sourced from gifts received from the appellant's father and sister. The appellant effectively demonstrated the trail of funds and the legitimacy of the transactions, leading to the conclusion that no addition was warranted.

Conclusion:
After careful consideration of the submissions and evidence presented by both parties, the Tribunal found in favor of the appellant. The Tribunal ruled that the appellant had successfully substantiated the source of the cash deposits in the bank accounts, leading to the decision to allow the appellant's appeal partly. The Tribunal directed the Assessing Officer to delete the addition of Rs. 14,00,000, emphasizing the adequacy of evidence provided by the appellant to support the legitimacy of the transactions.

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