2014 (12) TMI 1014 - AT - Income Tax

Confirmation of addition by CIT(A) Deposits treated as unexplained investment u/s 69 - Held that - The source of such cash deposits have been explained by assessee to have originated from opening cash balance of ₹ 4,67,737 and cash withdrawals - assessee s claim of availability of opening cash balance cannot be disbelieved - assessee has made cash deposits of ₹ 5,65,000 till 11/06/2009 it would be reasonable to infer a part of cash deposits could have been met out of the opening cash balance available with assessee as on 01/04/2009 - deposits to the extent of ₹ 4,67,737 can be said to be from explainable source - cash deposits made on 06/10/2009, of ₹ 2,00,000 and on 06/11/2009 of ₹ 75,000 and ₹ 1,00,000 can reasonably be linked to cash withdrawals made on 07/07/2009 of ₹ 1,00,000, on 02/09/2009 of ₹ 75,000 and on 22/09/2009 of ₹ 2,00,000 - cash withdrawals have been completely overlooked by CIT(A) - assessee s contention that peak negative cash balance of ₹ 1,45,863 as on 26/01/2010 can alone be considered for addition u/s 69 is acceptable the order of the CIT(A) modified Decided partly in favour of assessee. Deletions made by CIT(A) - Amounts received through cheque/RTGS ₹ 18,88,050 Cash loan received from M/s Latabai Gupta ₹ 5,00,000 - Deposits from withdrawal made earlier ₹ 1,00,000 - Held that - As far as the amount of ₹ 18,88,050 is concerned, it is established on record that the amount was received from six different persons through cheque/RTGS - when the source of deposits to the tune of ₹ 18,88,050 stood explained there is no justification in treating it as unexplained investment of assessee - In so far as deposits of ₹ 5 lakhs claimed to have been made out of cash loan of ₹ 5 lakhs received from Smt. Latabai Gupta is concerned, AO not only initiated but also imposed penalty u/s 271D of the Act against assessee for having received loan in cash in violation of section 269SS of the Act the action on the part of AO is suggestive of the fact that he has accepted the cash loan to be genuine - CIT(A) was justified in deleting the addition to the extent of ₹ 5,00,000 - assessee has made cash withdrawal of ₹ 1,00,000 on 21/11/2009, whereas assessee made cash deposits of ₹ 1,00,000 on 17/12/2009 - it is reasonable on the part of CIT(A) to conclude that, cash withdrawal made earlier was utilized for making the deposit the order of the CIT(A) is upheld Decided against revenue.

Summary

Issues Involved:
1. Addition of unexplained deposits in ICICI Bank account.
2. Confirmation of addition to the extent of Rs. 9,65,000 by CIT(A).
3. Deletion of additions by CIT(A) related to cheque/RTGS amounts, cash loan, and deposits from earlier withdrawals.

Analysis:

Issue 1: Addition of unexplained deposits in ICICI Bank account
- The AO found undisclosed deposits in the ICICI Bank account totaling Rs. 34,54,028 during the assessment year.
- The AO treated the deposits as unexplained investments under section 69 due to lack of evidence of the source.
- Assessee explained that the deposits originated from opening cash balance and earlier cash withdrawals.
- CIT(A) disbelieved the opening cash balance but acknowledged some withdrawals were linked to the deposits.
- ITAT reviewed the cash deposits timeline and concluded that a portion of the deposits could be explained by the opening cash balance and earlier withdrawals.
- ITAT confirmed the addition of Rs. 1,45,863 out of the total addition of Rs. 9,65,000 sustained by CIT(A) under section 69.

Issue 2: Confirmation of addition to the extent of Rs. 9,65,000 by CIT(A)
- CIT(A confirmed the addition of Rs. 9,65,000 due to the inability of the assessee to explain the source of certain cash deposits.
- Assessee argued that the opening cash balance was shown in previous balance sheets and supported by cash transactions.
- ITAT analyzed the cash deposits made by the assessee and found that a significant portion could be linked to the opening cash balance and earlier withdrawals.
- ITAT upheld the addition of only Rs. 1,45,863 out of the total amount sustained by CIT(A) under section 69.

Issue 3: Deletion of additions by CIT(A) related to cheque/RTGS amounts, cash loan, and deposits from earlier withdrawals
- CIT(A deleted additions of Rs. 18,88,050 received through cheque/RTGS, Rs. 5,00,000 cash loan, and Rs. 1,00,000 deposits from earlier withdrawals.
- The sources of these amounts were explained by the assessee through confirmations and evidence.
- ITAT reviewed the evidence and confirmed CIT(A)'s decision to delete the additions, as the sources were adequately explained.
- The department's appeal against the deletions was dismissed by ITAT.

In conclusion, the ITAT partially allowed the assessee's appeal and dismissed the department's appeal, confirming the addition of Rs. 1,45,863 out of the total disputed amount. The judgment highlighted the importance of providing evidence for the sources of deposits and withdrawals to avoid unexplained income additions under the Income Tax Act.