2022 (5) TMI 766 - AT - Income Tax

Unexplained cash deposits in bank - receipt of rental deposits from various tenants as there is time gap between receipt of rent deposits and the deposit into the bank accounts - HELD THAT - Assessee actually received rent deposits from various parties to the tune of Rs.1.54 crores and out of this, an amount of Rs.40,95,300 has been given credit towards the deposits in assessee s wife s bank account.- CIT(Appeals) has not accepted that the balance of Rs.1,08,00,000 is available to the assessee to deposit the same into the bank account of the assessee at Rs.1,07,72,650. The lower authorities have not brought on record any evidence to show that these rental deposits of Rs.1,08,00,000 have been used by the assessee for any other purpose or used to deposit in any other bank account. Thus, it cannot be said that these rental deposits received from various tenants were used for assessee s personal purpose or any other investment purpose. It cannot be disputed that the rent deposits received from various tenants have been used by the assessee for any other purpose than the deposit into various bank accounts. The assessee might have kept the rent deposits received in the form of cash with him and deposited the same into various bank accounts at a later date. It is quite possible that the assessee might have kept the rent deposits received in the form of cash for some purpose and the same remains to be utlised for one reason or the other and the cash balance continued to remain with him for a long period. Later, the assessee deposited into various bank accounts. Some times it may also happen that cash balance with the assessee continues to remain as cash balance even for many months and sometimes received by the assessee might be on the same day. All these probable aspects of the matter cannot be simply ignored or brushed aside. The fact remains that the cash rental deposits have been received by the assessee which is not at all disputed and usage of the same for deposits into various bank accounts cannot be rejected outrightly. Considering all the cash deposit into various bank accounts made by the assessee on various dates should be reasonably presumed that it is from the cash rental deposits received by the assessee on various dates. - Decided in favour of assessee.

Issues Involved:
1. Enhancement of addition from 20% to 100% of cash deposits.
2. Enhancement of income by Rs. 40,23,500/- leading to double taxation.
3. Jurisdiction of CIT(A) to enhance income not considered by the Assessing Officer (A.O).
4. Violation of the principle of consistency by CIT(A).
5. Non-consideration of correlation between rental security deposits and cash deposits.

Issue-wise Detailed Analysis:

1. Enhancement of Addition from 20% to 100% of Cash Deposits:
The CIT(A) enhanced the addition from 20% of Rs. 69,54,150/- to 100%, despite the A.O's remand report explaining cash deposits of Rs. 1,07,00,000/-. The appellant argued that the CIT(A)'s enhancement was against the A.O's opinion and the facts. The Tribunal found that the CIT(A) had not disputed the receipt of rental deposits but only the time gap between the receipt and the bank deposits. The Tribunal concluded that the cash deposits into various bank accounts should be reasonably presumed to be from the rental deposits received by the appellant. Hence, the addition of Rs. 1,07,72,650/- was deleted.

2. Enhancement of Income by Rs. 40,23,500/- Leading to Double Taxation:
The CIT(A) enhanced the appellant's income by Rs. 40,23,500/-, which was already considered in the hands of the appellant's wife, leading to double taxation. The Tribunal agreed with the appellant that this amount had been considered in the wife's hands and that the CIT(A)'s action resulted in double taxation. Consequently, the enhancement was deemed incorrect.

3. Jurisdiction of CIT(A) to Enhance Income Not Considered by the A.O:
The appellant contended that the CIT(A) had no jurisdiction to enhance the income by Rs. 40,23,500/-, which was not considered by the A.O. The Tribunal noted that the CIT(A) should not travel outside the matters considered and determined by the A.O. The Tribunal found that the CIT(A) had indeed overstepped her jurisdiction by enhancing the income based on items not before the A.O.

4. Violation of the Principle of Consistency by CIT(A):
The appellant argued that the CIT(A) violated the principle of consistency by sustaining and enhancing the addition in the appellant's case while deleting it in the case of the appellant's wife for the same assessment year and on similar evidence. The Tribunal agreed that the department should not take divergent stands on the same set of evidence for the same assessment year, leading to the conclusion that the CIT(A) had violated the principle of consistency.

5. Non-consideration of Correlation Between Rental Security Deposits and Cash Deposits:
The appellant established a correlation between the receipts of rental security deposits and the cash deposits in the bank. The CIT(A) did not consider this correlation, arguing that deposits from previous years or months should not be considered as sources for subsequent deposits. The Tribunal found that there is no law prohibiting the consideration of previous income for subsequent deposits. It was concluded that the rental deposits received by the appellant were a sufficient source for the cash deposits made into various bank accounts. The Tribunal deleted the addition made by the CIT(A), recognizing the correlation between the rental deposits and the cash deposits.

Conclusion:
The Tribunal allowed the appeal filed by the appellant, deleting the addition of Rs. 1,07,72,650/- and addressing the issues of double taxation, jurisdiction, consistency, and correlation of rental deposits with cash deposits. The Tribunal's decision was pronounced in the open court on 21st December 2021.

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