2024 (5) TMI 1078 - AT - Income Tax

Unexplained investment - Addition for payment made to company - submissions of assessee regarding genuine share transactions denied - HELD THAT - It is a fact that the total investment were through banking channel and specific after withdrawals from Axis Bank Account - Once source of deposits of this account is explained and admitted then again making addition on account of withdrawals from there amount it unjustified. Assessee had made withdrawals in Goa during family visit, The addition is on account of credit in bank account or somewhere else is totally irrational. Once the source of deposit is explained then making of addition on account of withdrawals of amount is erroneous. Addition from undisclosed source which is part of circulation of cash transaction is regarding the bridal business. Assessee claimed that deposits were taken from customers as security and later on when bridal dresses and ornaments were returned the same were refunded. AO and CIT(A) erred in holding 30% of deposits merely on the basis of suspicion. Considering the nature of business of hiring bridal items by the assessee the gross income generated therefrom of Rs. 4,25,562/- and accepted by the department, the security amount can easily be calculated at 10% times of the hire charges, which works out at Rs. 38,68,745/-. Therefore assessee had satisfactorily explained the bank entries regarding cash deposits and withdrawals. In view of above material facts and circumstances passing of impugned orders has led to miscarriage of justice which is required to be remedied. Assessee appeal allowed.

Summary

Issues Involved:
1. Condonation of delay in filing the hard copy of the appeal.
2. Legitimacy of additions made by the Assessing Officer (AO) and Commissioner of Income Tax (Appeals) [CIT(A)] regarding unexplained investments, unexplained expenditures, and income from undisclosed sources.

Summary:

1. Condonation of Delay:
The application for condonation of an 8-day delay in filing the hard copy of the appeal was allowed. The delay was attributed to the Authorized Representative suffering from viral fever, supported by an affidavit and medical certificate. The Tribunal found no malafide intention as the appellant did not gain anything by the delay.

2. Legitimacy of Additions:
The appeal was against the order dated 27.04.2022 by the CIT(A) and the assessment order dated 26.02.2015 by the AO, which determined the total income as Rs. 41,75,050/- against the declared income of Rs. 3,31,930/- for the assessment year 2012-13.

3. Scrutiny and Notices:
The assessee's case was selected for scrutiny through CASS. Notices u/s 143(2) and 142(1) of the Income Tax Act, 1961 were issued. The assessee's Authorized Representative attended the proceedings and submitted written submissions and documents.

4. Transactions with Commodity Stock Exchange:
The AO found transactions with the Commodity Stock Exchange and added Rs. 73,65,383/- as credit entries from Pace Stock Broking Services Pvt. Ltd. and Pace Commodity Brokers Pvt. Ltd. The assessee failed to maintain books of accounts and get them audited u/s 44AB, leading to penalties u/s 271A and 271B.

5. Bank Account Analysis:
The AO analyzed the assessee's AXIS bank account and found unexplained cash deposits. The assessee claimed these were security amounts received from customers for her bridal business. The AO added Rs. 4,80,000/- as unexplained expenditures based on ATM withdrawals in Goa.

6. CIT(A) Appeal:
The assessee's appeal to the CIT(A) was dismissed. The CIT(A) upheld the additions made by the AO, including Rs. 12,55,000/- as unexplained investment, Rs. 4,80,000/- as unexplained expenditure, and Rs. 15,88,118/- as income from undisclosed sources.

7. Tribunal's Findings:
The Tribunal found that the AO and CIT(A) made additions based on surmises and estimations without adverse material on record. The Tribunal noted that the transactions with Pace Companies were through banking channels and verified. The Tribunal held that the AO erred in considering bank deposits as undisclosed income and in treating ATM withdrawals as unexplained expenditures.

8. Conclusion:
The Tribunal allowed the appeal, setting aside both the impugned orders. The Tribunal found that the assessee satisfactorily explained the bank entries regarding cash deposits and withdrawals, and the additions made by the AO and CIT(A) were unjustified.

Order Pronounced:
The order was pronounced in the open court on 20th May, 2024.