2014 (3) TMI 884 - AT - Income Tax

Deletion made u/s 68 of the Act Unexplained cash u/s 68 of the Act Held that - The assessee has given the detailed statement of withdrawals and deposits in his bank account - the deposits were made out of the cash in hand from earlier withdrawals as well loans and advances etc. - Even the assessee has also explained the necessity and requirement of making such transactions - when the deposits in the bank accounts are made from the cash balance available to the assessee in its books of accounts, addition under section 68 cannot be made irrespective of the time between the earlier withdrawal from the bank and such deposits - the assessee has established the correlation between the entries of withdrawals and that of deposits. Merely because the number of transactions was more, that itself is not sufficient to hold that the same has arisen out of the undisclosed income of the assessee especially when the assessee has explained the reasons and requirements of making such transactions further corroborated with books of accounts, bank statements and other relevant documents - The CIT(A) has thoroughly examined and discussed the facts and circumstances of the case and has passed a well-reasoned order deleting the additions made by the AO u/s 68 of the Act thus, there is no infirmity of the order of the CIT(A) Decided against Revenue.

Summary

Issues:
Deletion of addition of unexplained cash credit u/s.68 of the Income Tax Act.

Analysis:
The appeal was filed by the Revenue against the CIT(A)'s order regarding the deletion of an addition of Rs.13,37,532 under section 68 of the Income Tax Act. The AO observed cash deposits in the assessee's bank account and concluded that the withdrawals and deposits indicated unaccounted income. The CIT(A) considered the explanation provided by the assessee, which included details of loans received and repaid in cash, and accepted the submissions. The CIT(A) found minor discrepancies in narrations but concluded the transactions were genuine based on the evidence provided. The assessee furnished various documents during assessment proceedings to support the cash transactions. The CIT(A) directed the AO to delete the addition, which led to the Revenue's appeal.

The Tribunal noted the detailed statements provided by the assessee regarding withdrawals and deposits in the bank account. Citing precedent, the Tribunal emphasized that when deposits are made from the cash balance available to the assessee, addition under section 68 cannot be made, regardless of the time gap between withdrawals and deposits. The Tribunal found the correlation between withdrawals and deposits established by the assessee, supported by explanations and documentary evidence. The Tribunal upheld the CIT(A)'s order, stating that the assessee had adequately justified the transactions, considering the reasons and requirements provided along with supporting documents.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to delete the addition of unexplained cash credit under section 68 of the Income Tax Act. The Tribunal found no flaws in the CIT(A)'s well-reasoned order, emphasizing the assessee's explanations, correlation between transactions, and the documentary evidence presented.