2022 (7) TMI 261 - AT - Income Tax

Unexplained cash deposits - source of deposits - agriculture income - as per revenue explanation of the assessee is afterthought - HELD THAT - The documentary evidence is self serving and consequently he confirmed the addition. In our humble understanding, the CIT(A) was very well entitled to raise objections in the submissions and rejoinder of the assessee, but, the remand report of the AO cannot be dismissed at the threshold which partly supports the explanation of the assessee regarding cash amount deposited to the bank account of the assessee. AO, after considering the entire facts and circumstances, relevant documentary evidence in the form of bank statements, accounts of family members in the ledger of the firm, concluded that the assessee could not produce any evidence for the balance amount. CIT(A) was duty-bound to consider the remand report of the AO wherein the AO has not raised any objection regarding the cash deposits to the bank account of the assessee after examination and verification of the relevant documentary evidence and statement of assessee's son Shri Mohit except alleging that the assessee has not produced any evidence on balance amount of Rs. 96,000/-. CIT(A) has given a sustainable finding for confirming the entire cash deposit to the bank account of the assessee. It cannot be ignored that the assessee and her family members jointly own 25 acres of fertile land in the State of Haryana and her husband also runs an enterprise related to the agricultural activities. The statement of the son of the assessee Shri Mohit clearly reveals that the amount of more than Rs. 15 lakh was received out of sale of one crop and household expenses were met from the other agricultural income and income from the firm. Thus the CIT(A) has gone wrong in dismissing the explanation of the assessee as well as remand report of the AO at the threshold by merely alleging the same as afterthought and self serving. Therefore, impugned first appellate order is set aside. As clear that before the AO, during remand proceedings, the assessee could not produce any sustainable evidence regarding part amount of Rs. 1,96,779/-. Except this, the AO found the explanation of the assessee and all relevant evidences in order and, therefore, safely presume that the assessee could not produce any evidence and sustainable explanation regarding cash deposit of Rs. 1,96,779/-. Therefore, the addition to this extent is sustainable and restrict the addition to Rs. 1,96,779/-. The AO is directed to delete remaining amount of addition

Summary

Issues Involved:
1. Whether the assessment order was passed within the prescribed time limits as per Section 153 of the Income Tax Act, 1961.
2. Whether the addition of Rs. 17,01,000/- to the income of the assessee was justified.

Issue-wise Detailed Analysis:

Ground No. 1: Assessment Order Timeliness

The assessee contended that the assessment order dated 26.12.2018 was received on 03.01.2019, implying it was not passed within the prescribed time limit of 31.12.2018 as per Section 153 of the Income Tax Act, 1961. The assessee argued that the assessment order should be considered invalid due to this delay. However, the tribunal agreed with the revenue's argument that the requirement under Section 153 is only that the order must be made within the prescribed time limit, not necessarily served within that period. Consequently, the tribunal dismissed this ground as devoid of merit, emphasizing that the order dated 26.12.2018 was validly passed within the stipulated timeframe.

Ground No. 2: Addition of Rs. 17,01,000/-

The assessee challenged the addition of Rs. 17,01,000/- made by the Assessing Officer (AO), arguing that the Ld. CIT(A) erred in not properly considering the remand report. The assessee claimed that all cash deposits were explained, but the AO considered the explanations as an afterthought. The tribunal examined the detailed submissions and remand report, which included the following points:

1. Background and Compliance Issues: The assessee, a homemaker, did not file a return of income for the relevant assessment year. Notices under Sections 148 and 142(1) of the Act were issued but not complied with, leading to an ex-parte assessment under Section 144, adding Rs. 17,01,000/- as unexplained cash deposits.

2. Explanation of Cash Deposits: The assessee explained that the deposits were from agricultural income generated by her family, who owned approximately 25 acres of fertile land. The cash was withdrawn from the firm M/s. Shri Guru Nanak Traders, where her husband and sons were partners, and deposited into her account to fund her nephew's business.

3. Remand Report Findings: The AO's remand report confirmed that the family owned 25 acres of land and had made substantial cash withdrawals from the firm, which were subsequently deposited into the assessee's bank account. The AO accepted the explanation for most of the deposits but noted a discrepancy of Rs. 1,96,779/- for which no evidence was provided.

4. Tribunal's Conclusion: The tribunal found that the Ld. CIT(A) erred in dismissing the assessee's explanation and the AO's remand report without proper consideration. The tribunal recognized the agricultural income and the firm's withdrawals as valid sources for the cash deposits. However, it upheld the addition of Rs. 1,96,779/- due to the lack of evidence for this specific amount.

Final Judgment:

The tribunal concluded that the Ld. CIT(A) was wrong in dismissing the explanation and remand report as afterthoughts. It set aside the first appellate order and directed the AO to delete the addition except for Rs. 1,96,779/-, for which the assessee could not provide sufficient evidence. Thus, the appeal was partly allowed, and the decision was pronounced in the open court on 23.06.2022.