2016 (9) TMI 1184 - AT - Income Tax

Unexplained source of the cash deposits - Held that - The assessee has deposited cash in bank to the tune of ₹ 16,18,000/- for which the assessee has explained by way of cash flow statements , cash book , bank book/summary, bank statements etc. to justify the sources of the cash deposit which mainly is claimed by the assessee to have arisen from business receipts from dress designing business, receipt of interest income in cash from Manohar Ahuja and re-deposit of cash withdrawn from the bank accounts as set out above. The assessee has submitted paper book which contained various bank statements, cash book and summary charts to explain that shortage of cash was only to the tune of ₹ 4,29,452/- and not ₹ 16,18,000/- as alleged by the authorities below and submitted that to the extent of ₹ 4,29,452/- addition is sustainable and acceptable to the assessee . These contentions along with documents and cash flow/summaries submitted have not been verified by the authorities below. In our considered view and in the interest of justice and fair play, we set aside and restore this issue back to the file of the A.O. for verification , examination and enquiry of the claim of the assessee , in the light of the cash flow statement , summaries, cash book, bank statement and other relevant evidences which the assessee files to support her contentions in her defense with respect to the deposit of the cash in the bank , and also in the light of any other explanation which the AO may require for proper adjudication of the issue on merits . The A.O. shall thereafter frame the assessment de-novo on merits after considering all the evidences and explanation furnished by the assessee on merits. Needless to say proper and adequate opportunity of being heard shall be provided by the AO to the assessee in accordance with principles of natural justice in accordance with law. - Decided in favour of assessee for statistical purpose.

Issues Involved:
1. Disallowance of society charges, electricity charges, and telephone charges.
2. Addition of ?16,18,000 as unexplained cash credits under Section 68 of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Disallowance of Society Charges, Electricity Charges, and Telephone Charges:
The appellant initially raised the issue of disallowance of ?29,292 for society charges, ?6,340 for electricity charges, and ?5,000 for telephone charges. However, at the outset, the appellant's counsel submitted that the assessee is not pressing ground No. 1, and the same was dismissed as 'not pressed' without any objection from the Departmental Representative.

2. Addition of ?16,18,000 as Unexplained Cash Credits:
The core issue revolved around the addition of ?16,18,000 as unexplained cash credits under Section 68 of the Income Tax Act, 1961. The assessee, involved in the profession of dress designing, had shown total receipts of ?6,77,865 from her business and an interest income of ?78,094 from Mr. Manohar Ahuja. The Assessing Officer (AO) observed that the assessee had deposited ?16,18,000 in her bank accounts and sought an explanation for the source of these deposits.

The assessee claimed that the cash deposits were from business receipts and cash withdrawals from bank accounts. However, the AO found discrepancies in the explanations provided. The AO noted that the total business receipts were much lower than the cash deposits, and the cash withdrawals claimed by the assessee were not sufficient to cover the deposits. The AO identified certain entries in the bank statements that were not actual cash withdrawals, thus rejecting the assessee's claim and adding ?16,18,000 as unexplained cash credits.

On appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, noting that the assessee failed to provide complete details of all parties from whom business receipts were received, including names, addresses, dates, modes of receipts, bills raised, and relevant ledger/bank extracts. The CIT(A) concluded that the AO was correct in rejecting the assessee's claims and confirmed the addition of ?16,18,000 under Section 68.

In the second appeal before the Tribunal, the assessee's counsel argued that the cash deposits were from business receipts, interest income, and cash withdrawals. A fresh cash flow statement was presented, suggesting a shortage of cash of ?4,29,452 instead of ?16,18,000. The counsel also highlighted specific bank withdrawals that were allegedly overlooked by the authorities.

The Departmental Representative supported the CIT(A)'s order but suggested that verification of the cash flow statement and bank statements was necessary. The Tribunal, after considering the submissions and evidence, decided to set aside the issue to the AO for verification and de-novo determination. The AO was directed to examine the cash flow statements, summaries, cash book, bank statements, and other relevant evidence provided by the assessee. The AO was instructed to frame the assessment de-novo on merits, ensuring proper and adequate opportunity for the assessee to be heard.

Conclusion:
The Tribunal allowed the assessee's appeal for statistical purposes, directing the AO to re-examine the evidence and explanations provided by the assessee regarding the source of cash deposits and to reassess the matter afresh. The proper and adequate opportunity of being heard was to be provided to the assessee in accordance with the principles of natural justice.

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