2020 (2) TMI 352 - AT - Income Tax

Unexplained Cash credits/cash deposit in Savings Bank Account - addition of peak amount - HELD THAT - CIT(A) disbelieved the amounts received by the assessee whereas the persons who had given the affidavits had not been cross-examined before rejecting the affidavits. As per AR the credits were in the bank account which was not a part of the books of accounts and the credits stood confirmed by the persons concerned and supporting documents to show the creditworthiness were also filed. It was also averred by the ld. AR that the cash balance in the books was also available and which could have been used for deposit in the bank account and detail of the cash balance available in the books on the various dates on which there were deposits in the bank account along with relevant pages of cash book were filed before CIT(A). We restore the issue for a limited purpose to the file of AO to verify and examine as to whether the assessee is entitled the benefit of opening cash in hand and cash available in books of account related to his business with regard to the amount after providing reasonable opportunity of being heard to the assessee. The assessee is also directed to cooperate with the AO for early disposal of the case and substantiate his claim with regard to cash deposit into the bank account and cash withdrawals from the bank account. Accordingly, we allow the sole ground raised by the assessee partly for statistical purposes.

Issues Involved:
1. Sustaining addition of peak amount on account of alleged unexplained cash credits/cash deposits.
2. Calculation of peak amount.
3. Acceptance of affidavits and evidence provided by the assessee.
4. Applicability of Section 68 of the Income Tax Act.
5. Benefit of opening cash in hand and cash available in books of accounts.

Detailed Analysis:

1. Sustaining Addition of Peak Amount on Account of Alleged Unexplained Cash Credits/Cash Deposits:
The primary issue raised by the assessee was the addition of ?9,18,900/- as unexplained cash credits/cash deposits in the savings bank account. The assessee argued that the amounts deposited were received from three individuals, supported by affidavits. However, the Assessing Officer (AO) did not accept this explanation, leading to an addition of ?18,16,500/- to the returned income. The CIT(A) later reduced this addition to ?9,18,900/- after considering the peak amount of unexplained deposits.

2. Calculation of Peak Amount:
The assessee contested the calculation of the peak amount, arguing that the correct peak amount should be ?7,12,500/-. The CIT(A) observed that the benefit of withdrawals from the capital account could not be given as these were for household expenses. Additionally, the CIT(A) did not allow the benefit of opening cash in hand and cash available in books of accounts due to a lack of evidence.

3. Acceptance of Affidavits and Evidence Provided by the Assessee:
The assessee provided affidavits from three individuals who claimed to have advanced money. The AO rejected these affidavits without cross-examining the individuals, which the assessee argued was a violation of natural justice. The assessee cited the Supreme Court decision in Mehta Parikh vs. CIT, which held that contents of an affidavit cannot be rejected without cross-examination. The CIT(A) also directed the AO to record the statements of the individuals, but only one of them could attend due to health reasons.

4. Applicability of Section 68 of the Income Tax Act:
The AO relied on Section 68, which deals with amounts credited in the books of accounts. The assessee argued that the bank passbook is not considered a book of account as per the Bombay High Court decision in CIT vs. Bhaichand H. Gandhi. Therefore, the addition made under Section 68 was not justified.

5. Benefit of Opening Cash in Hand and Cash Available in Books of Accounts:
The assessee argued that some cash balance is always available for urgent needs and that the opening cash in hand should be considered. The CIT(A) did not allow this benefit due to a lack of evidence. The assessee also provided details of cash balance available in the books on various dates, which the CIT(A) did not consider.

Conclusion:
The Tribunal found that the CIT(A) had not fully appreciated the evidence provided by the assessee. The Tribunal restored the issue to the AO for a limited purpose to verify and examine whether the assessee is entitled to the benefit of opening cash in hand and cash available in books of accounts related to the amount of ?9,18,900/-. The AO was directed to provide a reasonable opportunity of being heard to the assessee, and the assessee was directed to cooperate with the AO and substantiate his claim. The appeal was partly allowed for statistical purposes.

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