2020 (12) TMI 77 - AT - Income Tax

Assessment u/s. 153C r.w.s. 153A - cash was deposited by assessee in two bank accounts maintained by assessee with Punjab National Bank and the assessee has not submitted any personal books or cash flow statement in respect of deposit - HELD THAT - Assessee has claimed before the AO that the amounts had been deposited in cash in the bank accounts maintained with the Punjab National Bank out of cash withdrawals from other bank accounts. Before the ld. CIT(A), the assessee has claimed that there was an opening cash balance of ₹ 405800/- as at 01.04.2005 which is primarily used for deposit of cash in bank accounts in previous year 2005-06. Assessee has submitted before us that the said opening cash balance of ₹ 4,05,800/- as at 01.04.2005 was the closing cash balance of the earlier year as at 31.03.2005 and the cash flow of the earlier year has been accepted by the Revenue, but the said facts are not emanating from the record before us. It is also not clear that the said bank accounts with PNB were declared by the assessee in the return of income regularly filed with the Revenue from year to year for the earlier years and also whether the said cash in hand of ₹ 4,05,800/- was accepted by Revenue in the earlier year and under these circumstances in the interest of justice and fair play, we are of the considered view that the matter be set aside and restored to the file of AO for afresh consideration for both the assessment years viz. ay 2006-07 and 2008-09 for denovo adjudication of the matter on merits in accordance with law - Decided in favour of assessee for statistical purposes.

Issues:
- Assessment made on income
- Addition of cash deposits in bank
- Interest charged under different sections of the Act
- Rejection of cash flow statements by CIT(A)
- Invocation of Section 153C of the Income-tax Act

Analysis:

Assessment made on income:
The appeals were directed against the appellate orders for assessment years 2006-07 and 2008-09. The AO had made additions to the income of the assessee based on cash deposits in bank accounts. The assessee contended that the additions were unjustified as the cash deposits were from definite sources explained by the assessee. The issue revolved around the correctness of the assessment made by the AO, which led to subsequent appeals before the CIT(A) and the tribunal.

Addition of cash deposits in bank:
The AO observed that cash deposits were made by the assessee in two bank accounts without submitting personal books or cash flow statements to substantiate the source of the deposits. The CIT(A) rejected the cash flow statements submitted during the appeal process. The tribunal noted discrepancies in the explanations provided by the assessee regarding the cash deposits and the lack of evidence to support the claims. The issue centered around the justification of the additions made by the AO and upheld by the CIT(A) concerning the cash deposits in the bank accounts.

Interest charged under different sections of the Act:
The appellant raised concerns about the interest charged under various sections of the Act, claiming it was unjustified. However, the judgment did not delve into specific details regarding the interest charges, and no further analysis was provided on this issue.

Rejection of cash flow statements by CIT(A):
The CIT(A) rejected the cash flow statements submitted by the assessee during the appeal process, stating that they were not filed with the return of income or during the assessment proceedings. This rejection played a crucial role in the decision-making process, highlighting the importance of submitting relevant documents and evidence in a timely manner to support the taxpayer's claims.

Invocation of Section 153C of the Income-tax Act:
The invocation of Section 153C was a pivotal aspect of the case. The Revenue conducted a search and seizure operation against Vaish Group, leading to the discovery of incriminating material related to the assessee. The tribunal emphasized the significance of finding incriminating material during searches against other persons to invoke Section 153C against the taxpayer. The judgment highlighted the necessity for the AO to establish a prima facie connection between the seized material and the taxpayer's income. The decision to set aside the matter and restore it to the AO for fresh consideration underscored the complexity and importance of complying with legal procedures and providing adequate evidence in such cases.

In conclusion, the judgment addressed multiple issues related to the assessment of income, addition of cash deposits, rejection of evidence, and the invocation of Section 153C of the Income-tax Act. The detailed analysis provided insights into the legal complexities involved in the case and the importance of adhering to procedural requirements and substantiating claims with appropriate evidence.

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