2015 (6) TMI 795 - AT - Income Tax

Unexplained cash deposits in the bank account - CIT(A) restricted addition - Held that - The financial year in question is 2007-08 and the affidavits have been sworn by the debtors during 27-07-11 to 25-07-2011 i.e. after the assessment order, the names of these debtors were not given to the AO. Thus the affidavits are nothing but a make believe evidence and an afterthought. The debtors nowhere specified when the loans were taken and when repaid so as to draw any view about availability of cash for the alleged gift. Thus entire edifice of the order is based on unverified, vague and specious pleas and the relief given by the ld. CIT(A) at ₹ 10.00 lacs is without proper reasonings & justification. Unaccounted gift - Based on the arguments made by the ld. DR, we find that neither the remand report is available on the record not it finds place in the order of the ld. CIT(A). Similarly, the cash flow statement do not appear to have been filed before lower authorities. Therefore, the cash flow statement become a new piece of evidence which is not verified by lower authorities. The gift was made the assessee s father and surprisingly debtors affidavits are filed. Therefore, it was desirable that father himself was properly examined as to details of years of lending money and receiving back so as to explain the availability of amount at the time of gift. If the rate of interest was 15% to 18%, it is quite likely that father s income could have been taxable income in earlier years. The assessee was very selective in giving effective explanation and evidence before the AO despite adequate opportunities. In the absence contents of application for additional evidence, the remand report and looking at the vagueness in the affidavits, we are of the view that proper assessment can be framed only by setting aside the appeals back to the file of the AO to decide the same afresh after giving a reasonable opportunity of being heard to the assessee. The assessee shall cooperate and produce all the materials which is asked for by the AO. With these observations, both the appeals are set aside to the file of the AO to decide the same afresh in accordance with law. - Decided in favour of assessee and the Revenue for statistical purposes.

Summary

Issues involved:
Cross appeals challenging the retention of additions under section 69 of the Income Tax Act and the justification of restricting the addition of unexplained cash deposits in a bank account.

Analysis:
1. The assessee contested the retention of additions under section 69 of the Act related to deposits in a bank account. The Assessing Officer (AO) found large cash deposits and questioned the source. The assessee explained the deposits as proceeds from the sale of agricultural land and a cash gift from the father. The AO added the amounts to the income, doubting the financial capacity of the father. The CIT(A) accepted fresh evidence of affidavits from borrowers, supporting the father's money lending activities and the gift to the assessee. The addition was deleted based on this evidence.

2. Regarding other additions, the CIT(A) acknowledged the assessee's exemption from maintaining accounts as a civil contractor under section 44AD but raised concerns about financial gains from loan transactions. The CIT(A) noted discrepancies in the cash flow and confirmed an addition of Rs. 7.70 lacs. Both parties appealed.

3. The assessee argued that the CIT(A) rightly accepted the affidavits and the father's financial capacity, leading to the deletion of the Rs. 10.00 lacs addition. The assessee highlighted the nature of income computation under section 44AD and explained various cash transactions to justify the inflow and outflow of funds. Citing relevant case law, the assessee emphasized the lack of obligation to explain every deposit exceeding turnover.

4. The Department Representative (DR) criticized the reliance on fresh evidence, questioning its timing and relevance. The DR raised doubts about the affidavits' authenticity and criticized the lack of proper documentation and reasoning in the CIT(A)'s order. The DR supported the addition of Rs. 7.70 lacs.

5. The Tribunal found discrepancies in the evidence and lack of verification of the cash flow statement. It noted the absence of the remand report and emphasized the need for a thorough assessment. The Tribunal directed a fresh assessment by the AO, stressing the importance of examining the father's financial activities and verifying the cash flow details. Both appeals were remanded to the AO for proper assessment.

6. Ultimately, the appeals of both parties were allowed for statistical purposes, and the matter was remanded for a fresh assessment in accordance with the law.