2018 (6) TMI 1229 - AT - Income Tax

Unexplained cash deposits in Bank account - Held that - Amount of 5 Lakhs has been withdrawn from account of assessee s NRE A/c to that extent amount should have been given credit by the authorities. An amount of 10, 78, 800/- was deposited out of the so called traveler cheques and out of assessee s own funds assessee being NRI and having substantial withdrawals from the US and also on the fact that he is a globe trotter being a senior employee. The explanation given by assessee cannot be simply rejected when he states that he encashed the traveler cheques and deposited cash in the bank account. The amounts are explained and hence the addition is not warranted. We are surprised to note that while Ld.CIT(A) accepts that the provisions of Section 68 cannot be invoked he invokes Section 69 of the Act which does not apply to the facts of the case. AO has not made out any case of unexplained investments made by assessee. These are simply deposits in the bank account which are generally considered as cash credits and provisions of Section 68 are correctly invoked by AO. For the reasons best known to the CIT(A) he invokes Section 69 which does not apply to the facts of the case. Since assessee has given proper explanation we are of the opinion that no addition is warranted. - Decided in favour of assessee.

Summary

Issues:
Appeal against CIT(A) order on cash deposits in bank account.

Analysis:
1. The case involved a nonresident assessee who filed a return of income for AY 2010-11 with total income of ?27,580, but the AO noticed cash deposits in the bank account. The AO added ?17,71,964 as unexplained credits under section 68 of the Income Tax Act due to lack of evidence on the sources of deposits.

2. Assessee appealed to CIT(A) and submitted various documents, including affidavits, bank details, and case laws to support the sources of cash credits. However, the CIT(A) rejected the additional evidence, stating that there was no direct nexus between the withdrawals and deposits, and confirmed the addition.

3. The assessee contended that the CIT(A) wrongly rejected the evidence under Rule 46A and failed to consider the explanations provided. The Tribunal found that the explanations regarding traveler cheques and funds from NRE account were valid, and the CIT(A) incorrectly invoked Section 69 instead of Section 68.

4. The Tribunal held that the AO did not establish unexplained investments by the assessee, and the deposits were considered as cash credits under Section 68. As the explanations were satisfactory, the addition was deemed unwarranted, and the AO was directed to delete the addition.

5. The Tribunal allowed the assessee's appeal, emphasizing that the CIT(A) erred in rejecting valid explanations and invoking an incorrect section. The order was pronounced on 22nd June 2018 by the ITAT Hyderabad.

This detailed analysis covers the issues involved in the legal judgment, addressing the assessment, appeals, evidentiary considerations, and the final decision by the Tribunal.