2022 (12) TMI 1519 - AT - Income Tax

Addition of deposits into bank account - assessee has not explained the source of deposit of this amount to the assessee s bank account - HELD THAT - Assessee explained before us that assessee has placed necessary evidence before the lower authorities that assessee having salary income which has been regularly deposited into bank account and also withdrawn from SB account from HDFC Canara banks. The total cash withdrawn by assessee was Rs. 13,72,500/- during the financial years 2015-16 2016-17. Out of which the assessee explained that Rs. 6.46 lakhs was used to redeposit only bank account during the demonetization period. However, the AO considered only Rs. 2.5 lakhs available to assessee to redeposit to bank accounts and this is not based on any material evidence. There was no evidence brought on evidence by the AO that the assessee is left with only Rs. 2.5 lakhs out of Rs. 13,72,500/- withdrawn by assessee from various bank accounts. Unless and until the AO brought on record any material that assessee has spent balance amount of Rs. 11,22,500/-, which has been withdrawn in earlier financial year 2015-16 2016-17, it is not possible to hold that the said amount is not available to assessee to redeposit into bank account. Considering the quantum of withdrawals made by the assessee in earlier financial years, that the amount of Rs. 3.96 lakhs addition sustained by the AO has been sourced by the earlier withdrawals and due credit to be given. Accordingly, considering the meagre amount of Rs. 3.96 lakhs, which addition is made by the AO, the amount withdrawn by assessee on earlier occasion has been unutilized and available to the assessee to redeposit to the bank account and according to me the source has been explained by the assessee by earlier withdrawals and the addition sustained by the CIT (A) is deleted. Appeal filed by the assessee is allowed.

Summary

Issues involved:
The issues involved in this case include the correctness of additions to the returned income, the arbitrary observations made by the CIT (A), the acceptance of the Assessing Officer's version over the Appellant's submissions, and the delay in filing the appeal before the Tribunal.

Additions to Returned Income:
The appellant, a salaried employee, had cash deposits during the demonetization period. The Assessing Officer accepted some explanations but added Rs. 3,96,000 as unexplained money. The CIT (A) confirmed this disallowance. However, the Tribunal found that the AO did not provide evidence that the appellant had only Rs. 2.5 lakhs available for redeposit. Considering the earlier withdrawals, the Tribunal held that the source of the Rs. 3.96 lakhs addition was explained. Therefore, the addition was deleted.

Arbitrary Observations by CIT (A):
The CIT (A) made observations questioning the appellant's cash withdrawals and redeposits. The Tribunal found these observations arbitrary and baseless. The Tribunal emphasized that the appellant's explanations were reasonable, and the CIT (A) erred in upholding the AO's actions without proper consideration of the appellant's submissions.

Acceptance of AO's Version:
The AO held that the appellant failed to explain the source of cash deposits. The Tribunal disagreed, noting that the appellant had provided evidence of salary income and cash withdrawals. The AO's conclusion that only Rs. 2.5 lakhs was available for redeposit lacked material evidence. The Tribunal found that the earlier withdrawals accounted for the disputed amount, leading to the deletion of the addition.

Delay in Filing Appeal:
The appellant faced a delay of 282 days in filing the appeal, attributed to the Covid period and wrong advice from the Chartered Accountant. The Tribunal, considering the Supreme Court's judgment on exclusion of Covid period in limitation calculations, condoned the delay of 44 days. The Tribunal admitted the appeal for adjudication, emphasizing the valid reasons for the delay.

Conclusion:
The Tribunal allowed the appeal, overturning the addition of Rs. 3.96 lakhs to the appellant's income. The Tribunal found that the source of the disputed amount was explained through earlier withdrawals. The delay in filing the appeal was condoned, and the case was decided in favor of the appellant.

Judge's Separate Judgement:
No separate judgment was delivered by the judge in this case.