2016 (1) TMI 616 - AT - Income Tax

Unexplained cash deposits in the assessee s, a salaried person, bank account - Held that - The assessee has not specified the cash required for house-hold and/or personal purposes, as well as toward investments, if any, made from f.y. 2005- 06 onwards, to have any purposeful assessment of the cash with him in June, 2007 and January, 2008, whereat excess cash of ₹ 3.50 lacs and ₹ 0.25 lacs is stated to be available. Further still, there is no explanation for cash received from friends and relatives when the assessee himself has surplus cash of ₹ 3.50 lacs. It is stated that the same is to cover the short-fall to honour a cheque of ₹ 5 lac, which though did not materialize. However, no details of this payment/investment are provided - to whom was the cheque issued/to be issued, and for what purpose. Then, again, why was the amount not refunded back when the transaction did not materialize? Why, for all we know, the amount is outstanding for payment even to date - so much for the temporary loans. As regards the cash deposit of ₹ 25,000/-, the same has been explained as sourced from the cash withdrawal during the current year. The same only implies a reduction in the cash withdrawal for the year by ₹ 25,000/-. The least that the assessee is therefore required to state is the cash withdrawal for the year, i.e., upto 27.1.2008. The cash withdrawal for the year has already been observed to be lower for the initial months, suggesting absorption of the surplus cash, if any, and in any case only to meet the day-to-day requirements. As already observed of no case being made out with reference to the date-wise withdrawal or by way of cash flow statement, specifying the cash requirement for maintenance purposes and/or investments, if any. - Decided against assessee.

Summary

Issues Involved:
1. Validity of assessment order under section 143(3) without notice under section 143(2)
2. Non-compliance with CBDT Instruction dated 08.09.2010
3. Addition of unexplained cash deposits in the bank account

Issue 1: Validity of assessment order under section 143(3) without notice under section 143(2):
The appeal contested the assessment under section 143(3) of the Income Tax Act, 1961, for the assessment year 2008-09, citing the absence of a notice under section 143(2) as a legal flaw. The authorized representative argued that no valid notice was issued as the return of income was filed after the notice date mentioned in the assessment order. However, upon examination of the assessment record, it was revealed that notices under sections 143(2) and 142(1) were indeed issued before the return filing date. The contention that the absence of a valid notice under section 143(2) rendered the assessment order invalid was rejected, and the challenge under Ground 1 failed.

Issue 2: Non-compliance with CBDT Instruction dated 08.09.2010:
Ground 2 raised the issue of the Assessing Officer not following the CBDT Instruction dated 08.09.2010. However, this ground was not pursued during the hearing and was dismissed as not pressed, as it was not responded to by the Revenue.

Issue 3: Addition of unexplained cash deposits in the bank account:
The final ground challenged the addition of Rs. 5,25,000 towards unexplained cash deposits in the assessee's bank account. The assessee, a salaried individual, argued that since they did not maintain books of account due to not being engaged in business or profession, no addition under section 68 should be made. The assessee claimed that the cash deposits were justified by cash withdrawals and temporary loans from friends and relatives, supported by confirmations. However, the Tribunal found the explanation unsubstantiated and unproved. The Tribunal held that the cash deposits represented unexplained cash-in-hand and investments, falling under sections 69/69A. The Tribunal emphasized the need for proper explanations regarding the nature and sources of the cash deposits, highlighting the lack of detailed cash flow statements and justifications for the cash accumulation. Consequently, the addition of Rs. 5.25 lakhs was upheld, and the appeal was dismissed.

In conclusion, the Tribunal upheld the assessment order, rejected the challenges related to the absence of a notice under section 143(2) and non-compliance with CBDT Instruction, and confirmed the addition of unexplained cash deposits in the bank account. The detailed analysis considered legal provisions, factual explanations, and substantiation requirements, leading to the dismissal of the appeal.