2018 (1) TMI 1035 - AT - Income Tax

Unexplained cash deposits - proof of actual withdrawal and actual deposits - Held that - Assessing Officer just disbelieved the cash deposits and cash withdrawal on the basis of surmises and conjectures. Nowhere he doubted the actual withdrawal and actual deposits. He merely held that is an unusual phenomenon to make withdrawal from the bank and deposit into the bank. Learned CIT(A) has recorded complete and detailed findings and after obtaining remand report from the Assessing Officer has allowed relief to the assessee correctly. On perusal of the computation of income filed by the appellant it is seen that besides income from generator maintenance, the appellant was enjoying income from rental of property which was also, in turn, duly supported by agreements and, therefore, any apprehension with reference to having any undisclosed income in the hands of the appellant was misplaced and misconceived and was only on account of wishful thinking of the assessing officer. There is no material or any other evidence on record to show and suggest that the cash might have been utilized by the appellant for any other purposes and merely on surmises and conjectures and suspicion the evidence which has been submitted by the appellant cannot be rejected. - Decided against revenue

Summary

Issues Involved:
1. Unexplained cash deposits.
2. Admission of additional evidence under Rule 46A of IT Rules.

Issue-wise Detailed Analysis:

1. Unexplained Cash Deposits:
The Revenue challenged the CIT(A)'s decision to allow relief of ?1,43,46,500/- to the assessee concerning unexplained cash deposits. The Assessing Officer (AO) had added this amount to the income, suspecting the cash deposits in various bank accounts were unexplained. The AO noted that although the assessee provided a cash flow statement showing cash withdrawals and deposits, it did not conclusively prove that the deposits were made from previously withdrawn cash. The AO's skepticism was based on the unusual pattern of frequent withdrawals and deposits, which he found suspicious and indicative of possible tax evasion.

The assessee contended that no new evidence was submitted to the CIT(A) apart from a consolidated cash flow statement already provided to the AO. The CIT(A) accepted the cash flow statement and other supporting documents like the cash book and bank statements, which showed the availability of cash at the time of deposits. The CIT(A) found that the AO's conclusions were based on surmises and conjectures without any material evidence to disprove the assessee's claims. The CIT(A) noted that the AO did not doubt the actual withdrawals and deposits but rather questioned the rationale behind them.

The Tribunal upheld the CIT(A)'s findings, stating that the AO's rejection of the cash flow statement was not based on concrete evidence but on mere suspicion. The Tribunal emphasized that the AO failed to provide any material evidence to counter the assessee's explanation and that the onus was on the AO to pinpoint any defects in the cash flow statement. The Tribunal also referenced a similar case (Dy. C.I.T. vs. Shri Pawan Agarwal) where the appeal was dismissed based on a cash flow statement.

2. Admission of Additional Evidence under Rule 46A:
The Revenue argued that the CIT(A) admitted additional evidence in violation of Rule 46A of the IT Rules, as the assessee had multiple opportunities during the assessment proceedings to present this evidence but did not cooperate. The AO completed the assessment under section 144 of the I.T. Act due to the assessee's non-compliance.

The assessee countered that the evidence considered by the CIT(A) was not new but a consolidation of previously submitted documents. The CIT(A) had obtained a remand report from the AO during the appellate proceedings, where the AO reiterated his earlier observations without disputing the availability of cash shown in the cash flow statement. The Tribunal found no violation of Rule 46A, as the cash flow statement and other relevant documents were already part of the assessment record and were merely consolidated for clarity.

Conclusion:
The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to delete the addition of ?1,43,46,500/-. The Tribunal found that the CIT(A)'s findings were comprehensive and based on the evidence provided by the assessee, which the AO had failed to disprove with concrete evidence. The Tribunal also ruled that there was no violation of Rule 46A, as the evidence in question was already part of the assessment proceedings. The judgment was pronounced in the open court on 17/01/2018.