2024 (8) TMI 814 - AT - Income Tax

Addition u/s 68 - unexplained money - initial discharge on onus - source of cash was justified by the assessee stating that it was received from the relatives - AO doubted the genuineness of loan and creditworthiness of the parties for reason that the parties were not filing the returns of income and there was meagre balance in their bank accounts - HELD THAT - We note that the AO did conduct inquiries before rejecting the primary documentary evidence provided by the assessee. AO in the present case without making an inquiry or bringing any contrary material held that the assessee has deposited own unexplained cash in her bank account. The Hon ble Supreme Court in the case of CIT vs. P. Mohanakala 2007 (5) TMI 192 - SUPREME COURT while dealing with scope of provision of the section 68 held that the opinion of the AO that the explanation furnished by the assessee as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on record. The opinion of the Assessing Officer is required to be formed objectively with reference to the material available on record. Application of mind is the sine qua non for forming the opinion . Once the assessee submits primary evidence regarding source of cash, the onus shifts on the AO to consider the material provided and make independent inquiry to find out genuineness of the evidence or bring material contrary to the facts explained by the assessee. AO cannot reject the primary evidence furnished by the assessee without appreciating the facts available on record or without bringing contrary material to from the belief that primary documents or explanation furnished by the assessee are not satisfactory. In the present case the assessee has provided all the necessary documentary evidence justifying the source of cash deposited in the bank. However, the AO merely based on surmises and conjecture held that the assessee has routed own unaccounted cash in the guise of unsecured loan which is not justified. Therefore, direct the AO to delete the addition made by him. Hence the ground of appeal filed by the assessee is hereby allowed.

Summary

Issues:
- Addition of Rs. 26,79,000 as unexplained money u/s 68 of the Act.

Analysis:
The appeal was filed against the order passed by the NFAC, Delhi, regarding the addition of Rs. 26,79,000 as unexplained money under section 68 of the Act for the assessment year 2017-18. The assessee, an individual working in a garment factory, deposited this sum in cash in the bank. The source of the cash deposit was explained by the assessee with details of parties and amounts involved. However, the AO disagreed, citing insufficient creditworthiness of the loan parties. The AO treated the cash deposit as unexplained money and added it to the total income of the assessee.

On appeal, the ld. CIT(A) upheld the AO's decision, leading the assessee to appeal to the ITAT. The assessee's representative argued that all necessary details and confirmations were provided during assessment, shifting the onus to disprove the explanation onto the revenue. The ld. AR contended that the addition should be deleted as the assessee had fulfilled the requirements under section 68 of the Act.

After considering the arguments, the ITAT found that the assessee had justified the source of the cash deposits with proper documentation. The AO's doubts regarding the creditworthiness of the parties were not substantiated with concrete evidence or inquiries. The ITAT emphasized that the AO must objectively assess the material provided by the assessee before rejecting it. The ITAT referred to a Supreme Court case to highlight the importance of proper appreciation of material by the AO. As the primary evidence provided by the assessee was not satisfactorily refuted by the AO, the ITAT directed the AO to delete the addition made, thereby allowing the appeal filed by the assessee.

In conclusion, the ITAT allowed the appeal, setting aside the findings of the ld. CIT(A) and directing the AO to delete the addition of Rs. 26,79,000 as unexplained money.