2012 (11) TMI 419 - AT - Income Tax

Unaccounted deposits in bank - Held that - The assessee has explained the source of cash deposits from cash withdrawal, opening balance consisting of gifts and business Income. The assessee s explanation that the gifts received in earlier years were of small amounts and not liable to tax and therefore no return was filed. This explanation, considering the amount appears to be plausible explanation - no addition is called for in the present case - in favour of assessee.

Summary

Issues:
- Appeal against order of Ld. CIT (A)- IV, Baroda dated 10-2-2012 for the assessment year 2001-02.
- Grounds of appeal raised in two parts: legality and merits.

Analysis:
1. The appellant raised grounds of appeal in two parts: legality and merits. The grounds related to legality were not pressed and thus not adjudicated. The grounds on merits focused on the explanation for a deposit of Rs.1,00,000, contending that it was fully explained and not liable to be added as cash credit under Sec.68/69.

2. The case involved an assessee who declared a total income of Rs.61,598 and was found to have deposited Rs.1 lac in the bank account during a search operation. The Assessing Officer (A.O.) added the amount to the income as undisclosed income. The CIT (A) and ITAT had previously confirmed the addition, leading to the current appeal.

3. During the reassessment proceedings, the assessee submitted a statement showing joint family income and surplus funds, explaining the source of cash deposits. The A.O. noted discrepancies in the explanation provided by the assessee regarding cash withdrawals and gifts received, leading to the addition of Rs.1 lac as unexplained cash credit.

4. The CIT (A) upheld the A.O.'s decision, emphasizing the lack of documentary proof supporting the appellant's claims regarding cash withdrawals and gifts received. The appellant's explanations were deemed insufficient as essential details and confirmations were missing, resulting in the confirmation of the addition.

5. In the appeal before ITAT, the assessee reiterated the source of cash deposits from cash withdrawals, opening balance, and business income. Considering the explanations provided and the totality of facts, ITAT concluded that no addition was warranted in the case, directing the deletion of the amount added by the A.O.

6. Ultimately, ITAT allowed the appeal of the assessee, overturning the addition made by the A.O. based on the explanations provided regarding the source of cash deposits. The decision highlighted the importance of substantiated explanations and supporting documentation in such cases to avoid unexplained cash credit additions.