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2020 (4) TMI 185 - AT - Income TaxUnexplained cash credits u/s 68 - cash withdrawal and deposit in the bank account - HELD THAT - Identity, creditworthiness and genuineness of the transactions, all three requirements go hand-in-hand, however, among all the three, the genuineness of the transaction shall take precedence and the same should be demonstrated clearly when the same is called in question by the Revenue. In the instant case, the theory of borrowing the money in cash from time to time by the assessee from her husband for meeting business expenditure is not supported by any verifiable demonstrable evidence and therefore, the same cannot be accepted. We find that once the Revenue has not disputed that the assessee is engaged in construction business and no independent source of such cash receipts has been determined, the nature of such cash receipts can reasonably be treated as undisclosed business receipts and only net profit arising thereon can be brought to tax. Before the ld CIT(A), the assessee has stated that she has reported net profit @ 8% of her turnover and has filed her return of income. There is no independent finding of the ld CIT(A) in this regard. In the result, we set-aside the matter to the file of the Assessing officer to verify the net profit which has been reported by the assessee for the year under consideration as the same has been accepted during the course of assessment proceedings and apply the same to undisclosed business receipts amounting to ₹ 73.50 lacs and which can be brought to tax. Appeal of the Revenue is partly allowed.
Issues:
Appeal against deletion of addition of ?73,50,000 made by AO under section 68 of the Act for unexplained cash credits for A.Y 2009-10. Analysis: 1. Issue of Unexplained Cash Credits: The Revenue challenged the deletion of addition of ?73,50,000 made by the AO under section 68 of the Income Tax Act for unexplained cash credits. The AO contended that the assessee failed to establish the necessity of cash for her business, leading to suspicion that the cash was actually undisclosed income deposited in her bank account. The AO found it dubious that the husband of the assessee withdrew a significant amount in cash and then deposited the same in the assessee's account. The AO concluded that the assessee did not receive any loan from her husband and deposited her own undisclosed income as cash. Hence, the addition was made. 2. Judgment of CIT(A): The CIT(A) reversed the AO's decision by finding a direct correlation between the cash amount deposited in the assessee's bank account and the identical amount withdrawn from her husband's account. The CIT(A) accepted that the cash came from the husband's account, explaining the source of the deposits. Consequently, the CIT(A) deleted the addition made by the AO, leading to the Revenue's appeal. 3. Arguments and Analysis Before ITAT: During the appeal before the ITAT, the Revenue argued that the explanations provided by the assessee were insufficient, emphasizing that there was no clear necessity for borrowing cash from the husband for business purposes. The Revenue disputed the findings of the CIT(A), stating that the matching withdrawals and deposits did not prove a legitimate source of the funds. The Revenue also highlighted the absence of recorded statements or confirmations regarding the cash transactions between the husband and the assessee. 4. ITAT's Decision: The ITAT considered the arguments of both parties and emphasized that merely matching transactions does not absolve the assessee from proving the genuineness of the cash receipts. While acknowledging the nature of the assessee's construction business, the ITAT directed the AO to verify the reported net profit and apply it to the undisclosed business receipts. The ITAT set aside the matter for further assessment to determine the tax liability on the undisclosed business receipts. In conclusion, the ITAT partly allowed the Revenue's appeal by setting aside the CIT(A)'s decision and directing a reassessment based on the reported net profit for the undisclosed business receipts.
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