2023 (11) TMI 703 - AT - Income Tax

Unexplained cash deposit in the bank account - onus to prove - cash deposited by the assessee was treated as unexplained income of the assessee by the AO on the reasoning that the assessee failed to make satisfactory explanation regarding the sources of such cash deposit - HELD THAT - We note that the assessee offered explanation regarding the sources of deposit made in the bank accounts and in support its explanation furnished copy of cash book and bank books - As the activity of withdrawing the cash, keeping the same as it is and redeposit the same in the bank after considerable period is very unusual practice but there is no prohibition under any of the law for the time being in force for doing such activity. Thus, merely an unusual activity of the assessee does not give an authority to the revenue to make the addition to the total income of the assessee. In fact the assessee in the given facts and circumstances has discharged the onus imposed under the provisions of section 68/ 69 of the Act by furnishing the necessary details which have been elaborately discussed in the preceding paragraph. Thus, the onus shifted upon the revenue to disprove the contention of the assessee based on the tangible materials. But we note that the learned DR has not brought any iota of evidence suggesting that the amount of cash deposit was not out of the cash withdrawal from the bank. Likewise, there was no information that the assessee has spent the cash withdrawal somewhere else towards the capital or revenue expenses. As there cannot be any addition to the total income of the assessee on account of cash deposited in the bank unless the revenue demonstrates that the amount in question has been used by the assessee for any other purpose. Thus, in our considered view the addition on account of cash deposit in the bank is based on assumption and presumptions of wrong facts which is bad in law. Decided in favour of assessee.

Summary

Issues Involved:
1. Addition of Rs. 46,98,90,920/- as unexplained cash deposit in the bank account.

Summary:

Issue 1: Addition of Rs. 46,98,90,920/- as unexplained cash deposit in the bank account

The assessee, a public company engaged in real estate, was selected for scrutiny to verify sources of cash deposit. The AO noticed significant cash withdrawals and deposits, leading to questions about the nature of these transactions. The assessee explained that the cash was withdrawn for land acquisition negotiations which were later canceled, resulting in redepositing the cash. The assessee claimed the negotiations were verbal, hence no documentary evidence was available.

The AO rejected this explanation, citing lack of evidence and referencing the Delhi High Court's decision in Shri Dinesh Kumar Jain vs. PCIT, where similar claims were dismissed due to insufficient substantiation. Consequently, the AO treated the cash deposits as unexplained income and made an addition of Rs. 46,98,90,920/- to the assessee's total income.

The CIT(A) upheld the AO's decision, emphasizing the need for cogent evidence to support the assessee's claims. The CIT(A) referenced the Supreme Court's decision in Roshan Di Hatti Vs. CIT, which supports making additions when the assessee fails to discharge the onus of proof.

Upon appeal, the ITAT scrutinized the materials and arguments presented. The ITAT noted that while the assessee's actions might appear unusual, there is no legal prohibition against such transactions. The ITAT emphasized that suspicion cannot replace evidence, as held by the Supreme Court in CIT vs. Daulat Ram Rawatmull. The ITAT found that the assessee had discharged its onus by providing necessary details, and the revenue failed to disprove the assessee's claims with tangible evidence. The ITAT also referenced similar cases where additions were deleted due to lack of evidence that the withdrawn cash was used elsewhere.

Ultimately, the ITAT concluded that the addition was based on assumptions and was not justified. The ITAT set aside the CIT(A)'s findings and directed the AO to delete the addition of Rs. 46,98,90,920/-, allowing the assessee's appeal.

Order pronounced in the Court on 16/11/2023 at Ahmedabad.