2021 (3) TMI 699 - HC - Income Tax

Addition u/s 68 - unexplained cash credit - HELD THAT - The assessee produced a photostat copy of the return of income filed by it for all the assessment years i.e., from 2003-04 to 2010-11 along with computation of income for all the years in the form of annexure to the written submissions. The appellant also submitted Photostat copies of the bank statements starting from 01.04.2002 to 31.03.2010 as annexures along with the written submissions. These facts appear to have weighed in the mind of the CIT(A) for granting relief to the assessee. Revenue alleged sufficient reasons have not been recorded. But, the Revenue would not be right in contending that the assessee never offered an explanation in spite of this alleged cash credit. Probably, if the CIT(A) had recorded its opinion upon perusal of the records placed in the form of annexures, in all probabilities, the Revenue would have been on appeal before us and not the assessee. Considering the fact that the assessee is an individual and also taking note of the fact that there is an explanation offered by the assessee, this Court is of the view that the matter can be remanded back to the CIT(A) for fresh consideration of the explanation offered by the assessee in respect of the alleged cash credit and pass a speaking order on merits and in accordance with law.

Summary

Issues:
1. Interpretation of Section 68 of the Income Tax Act regarding unexplained cash credit.
2. Validity of the findings of the Commissioner of Income Tax (Appeals) regarding a sum treated as unexplained cash credit.

Issue 1: Interpretation of Section 68 of the Income Tax Act regarding unexplained cash credit:
The appeal under Section 260A of the Income Tax Act, 1961 challenged the Tribunal's order concerning a sum of ?1,02,06,929 treated as unexplained cash credit for the assessment year 2012-13. The Assessing Officer held that the assessee failed to prove the source of this amount, leading to its taxation under Section 68 of the Act. The CIT(A) disagreed, stating that the balance sheet figures may not accurately reflect the actual financial situation. The Tribunal, however, sided with the Revenue, emphasizing the lack of evidence from the assessee to substantiate the nature of the sum. The Court noted the assessee's explanation that the amount was not introduced as cash or bank deposits during the relevant year, supporting their argument with detailed financial statements and bank records.

Issue 2: Validity of the findings of the Commissioner of Income Tax (Appeals) regarding a sum treated as unexplained cash credit:
The CIT(A) deleted the addition of the unexplained cash credit, highlighting the absence of direct evidence of the sum being introduced in cash or bank accounts during the relevant year. The Revenue contended that the CIT(A) failed to provide sufficient reasoning for this decision. The Court acknowledged the assessee's submissions of detailed financial records and bank statements covering multiple assessment years. Considering the explanations offered by the assessee and the need for a thorough review, the Court remanded the matter back to the CIT(A) for a fresh consideration and a detailed decision in accordance with the law.

In conclusion, the Tax Case Appeal was allowed, the Tribunal's order was set aside, and the matter was remanded to the CIT(A) for a comprehensive reevaluation. The substantial questions of law were left open, and no costs were awarded in this judgment delivered by the Madras High Court.