2021 (4) TMI 483 - AT - Income Tax

Unexplained cash deposits - no explanation on source of cash deposits - assessee has purchased immovable property through cash deposits in bank - Whether bank deposits have been made out of the cash book which has been not found to be incorrect and nor rejected? - HELD THAT - Entire payment for purchase of property has been made by the assessee from his bank account and the details of cash deposits has been incorporated - The source of cash deposits was from the business carried out by the assessee for which the assessee has given details of sales with the name of the parties which was to the tune of ₹ 2.13 crores. The summary of cash transactions along with date-wise detail of cash book which was produced before the authorities below has already been incorporated above. All the source of the cash deposits are from the regular books of account and cash books entry is also matching with the bank statement filed by the assessee in the paper book. In the light of the clear cut explanation which is duly supported by; firstly, the sale receipt of the assessee; and secondly, the amount which has been transferred from current account to his savings bank account which was duly appearing in cash book, explains the entire source. Therefore, it cannot be held that the cash deposits remain unexplained. In the light of the aforesaid explanation as submitted by the ld. counsel duly corroborated by the evidence on record, we hold that the entire cash deposits of ₹ 52 lac stands explained. Addition on household expenses - CIT(A) has confirmed the addition on the ground that assessee has not shown household expenses - HELD THAT - We find that the assessee had shown household expenses and cash drawings from savings bank account at ₹ 60,000/- and approximately ₹ 35,000/- for LIC payments. Apart from that, assessee has also explained that he was staying with his father and majority of the household expenses was borne out by him. Without there any specific finding or material, the addition based on pure surmises and presumption cannot be sustained. Accordingly, the same is directed to be deleted. Undisclosed payment of rent - Difference as per the amount mentioned in rent agreement and shown in the P L account - HELD THAT - It is clear from the rent agreement itself that on the expiry of the period mentions rent will be further increased by 10% per annum. The rent agreement was dated 20.11.2009 and year under consideration is Assessment Year 2012-13, therefore, increment of 10% as per the clause of the rent agreement itself justifies the payment of ₹ 10,000/- per month which has been duly shown by the assessee. Accordingly, there is no reason for making the addition of ₹ 12,000/-, same is deleted.Appeal of the assessee is allowed.

Summary

Issues Involved:
1. Addition of ?52,00,000/- as unexplained money.
2. Addition of ?1,20,000/- for household expenses.
3. Addition of ?12,000/- for rent difference.
4. Validity of the CIT(A) order dated 28.03.2017.

Detailed Analysis:

1. Addition of ?52,00,000/- as Unexplained Money:

The assessee was asked to explain the source of cash deposits totaling ?52,75,000/- in his bank account. The assessee claimed that these deposits were from the cash book of his proprietorship concern, M/s. KNT Overseas, which was engaged in the export business. The Assessing Officer (AO) did not find the explanation satisfactory and treated the amount as unexplained money under Section 69A of the Income Tax Act.

Upon appeal, the CIT(A) upheld the addition, stating that the source of the cash in the cash book was not substantiated with evidence. The assessee failed to provide sufficient proof for the receipt of ?15,00,000/- from M/s. PAM Fashions and did not justify the remaining ?37,75,000/-. The CIT(A) emphasized that the onus was on the assessee to prove the source of cash deposits, which was not fulfilled.

However, the Tribunal found that the assessee had provided a detailed summary of cash transactions, including opening balances, cash withdrawals, and receipts from M/s. PAM Fashions. The Tribunal noted that the cash book entries matched the bank statements, and the sales receipts supported the cash deposits. Consequently, the Tribunal held that the cash deposits were adequately explained and deleted the addition of ?52,00,000/-.

2. Addition of ?1,20,000/- for Household Expenses:

The AO added ?1,20,000/- to the assessee's income, estimating monthly household expenses at ?10,000/-, based on the observation that the assessee had not shown sufficient withdrawals for household expenses.

The assessee contended that he lived with his father, who bore the majority of the household expenses. The Tribunal found that the assessee had shown household expenses and cash drawings from his savings account amounting to ?60,000/- and approximately ?35,000/- for LIC payments. Without specific evidence to the contrary, the Tribunal held that the addition was based on assumptions and directed its deletion.

3. Addition of ?12,000/- for Rent Difference:

The AO added ?12,000/- to the assessee's income, noting a discrepancy between the rent debited in the Profit & Loss account (?1,20,000/-) and the amount mentioned in the rent agreement (?1,08,000/-).

The assessee explained that the rent agreement dated 20.11.2009 included a clause for a 10% annual rent increase, justifying the higher rent of ?10,000/- per month. The Tribunal accepted this explanation, finding that the increment was consistent with the agreement and deleted the addition.

4. Validity of the CIT(A) Order:

The assessee contended that the CIT(A) order dated 28.03.2017 was received on 15.03.2017, making it legally unsustainable. However, the Tribunal did not specifically address this issue in its judgment, focusing instead on the substantive issues raised in the appeal.

Conclusion:

The Tribunal allowed the appeal, deleting the additions of ?52,00,000/-, ?1,20,000/-, and ?12,000/- made by the AO and upheld by the CIT(A). The judgment emphasized the importance of corroborating evidence and the need to avoid assumptions in tax assessments.