2020 (1) TMI 1015 - AT - Income Tax

Addition u/s 68 - unexplained cash deposits - HELD THAT - We find that AO had concluded that assessee has not explained the source of cash deposits in the books of accounts satisfactorily as there was equal amount of cash deposits before the giving of loan by Mr. Uttam Chordiya to assessee. Before us, assessee has not controverted the submissions made by Ld. D.R. but has simply stated that assessee had furnished the confirmation and his PAN No. and thus assessee has complied with the requirements of Sec.68 of the Act. Before us also no satisfactory explanation about the source of cash deposits in the bank account of Mr. Uttam Chordiya has been provided by the assessee. In such a situation, considering the totality of the facts, we find no reason to interfere with the order of Ld.CIT(A). Thus, the grounds of the assessee are dismissed.

Summary

Issues:
Appeal against addition of ?15,57,000 u/s 68 of the Act - Source of cash deposits in bank account of lender - Compliance with Sec. 68 of the Act - Creditworthiness of transaction.

Analysis:
The appeal arose from the Commissioner of Income Tax (A)'s order for the assessment year 2013-14. The assessee, engaged in civil contracting, declared a total income of ?2,97,31,804. The assessment framed by the AO resulted in a total income of ?5,31,46,451. The primary issue revolved around the addition of ?15,57,000 u/s 68 of the Act, related to unexplained cash deposits in the bank account of the lender, Mr. Uttam Chordiya.

The AO observed discrepancies in the cash deposits in Mr. Uttam Chordiya's account before issuing loans to the assessee. Despite the assessee's submissions that the cash was from bank balances, the AO found the explanations unsatisfactory. The Ld.CIT(A) upheld the addition, emphasizing the need for the assessee to explain the source of cash deposits. The Ld.CIT(A) highlighted that the onus lay on the assessee to prove the source of funds, especially when dealing with a director of the company.

Before the ITAT, the assessee argued that the source of source of cash deposits need not be proven and any addition should be in Mr. Uttam Chordiya's hands. However, the ITAT upheld the Ld.CIT(A)'s order, stating that the assessee failed to provide a satisfactory explanation regarding the cash deposits. The ITAT noted that the confirmation and PAN details provided by the assessee did not address the core issue of the source of funds.

Ultimately, the ITAT dismissed the appeal, concluding that the assessee did not adequately explain the source of cash deposits, leading to the addition of ?15,57,000 u/s 68 of the Act. The judgment reaffirmed the importance of substantiating the source of funds in transactions, especially when dealing with related parties like directors of a company.

This detailed analysis highlights the key aspects of the legal judgment, focusing on the issues surrounding the addition under section 68 of the Income Tax Act and the necessity for the assessee to establish the credibility of transactions involving cash deposits.