2022 (9) TMI 1309 - AT - Income Tax

Unexplained cash credit u/s 68 - HELD THAT - The identical issue was raised in the own case of the assessee where the ITAT was pleased to delete the addition made by the authorities below. Revenue has not placed any material on record to point out any distinguishing feature in the facts of the case for the year under consideration and that of earlier year nor has placed any contrary binding decision in its support. The doctrines of judicial precedent have been evolved to ensure stability, consistency and conformity in law otherwise a judge could take any view in the interpretation of law resulting in chaos. In view of the above, we set aside the finding of the CIT-A and direct the AO to delete the addition made by him. Thus the ground of appeal raised by the assessee on merit is allowed.

Summary

Issues Involved:
1. Validity of reopening of assessment under Section 147 of the Income Tax Act.
2. Legitimacy of the addition of Rs. 3,84,57,514/- as unexplained cash deposit under Section 68 of the Act.

Detailed Analysis:

1. Validity of Reopening of Assessment under Section 147 of the Income Tax Act:
The assessee challenged the reopening of the assessment, asserting that the initiation of action under Section 147 was invalid. However, this issue became moot as the tribunal decided the case on the merits of the addition under Section 68. Consequently, the tribunal refrained from adjudicating the validity of the reassessment proceedings, deeming the ground raised by the assessee on this issue as infructuous.

2. Legitimacy of the Addition of Rs. 3,84,57,514/- as Unexplained Cash Deposit under Section 68 of the Act:
The primary issue was whether the addition of Rs. 3,84,57,514/- as unexplained cash deposit under Section 68 was justified. The assessee contended that the cash deposits did not belong to him but were made at the behest of Shri Lalitmal Asumal Gangvani, the proprietor of M/s. Bhagwati Enterprise. The Assessing Officer (AO) disregarded this contention and treated the deposits as unexplained cash credits.

The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, stating that the assessee's explanations were evasive and lacked credibility. The CIT(A) concluded that the cash deposits were the assessee's responsibility to explain.

Upon appeal, the tribunal noted that a similar issue had been addressed in the assessee's own case for the Assessment Years 2011-12, where the ITAT had deleted the addition made by the authorities. The tribunal emphasized that if cash deposits are treated as income, corresponding cash withdrawals should be considered as expenses. The tribunal found continuous cash deposits and withdrawals in the assessee's bank account, suggesting that the deposits could be related to previous withdrawals.

The tribunal also highlighted that the authorities had not verified the assessee's claim of acting on behalf of ceramic manufacturers, despite the assessee providing details of such parties. The tribunal inferred that the assessee was engaged in money transfer activities without a license, but the income tax authorities are concerned with taxing income regardless of its legality.

The tribunal criticized the CIT(A) for contradictory findings, where the CIT(A) initially acknowledged that only considering cash deposits without withdrawals was unjustified but later estimated the assessee's income at 25% of the deposits without a scientific basis.

Ultimately, the tribunal concluded that the assessee was acting as a money transfer agent and directed the AO to delete the addition. The tribunal allowed the assessee's appeal on merit and dismissed the revenue's appeal.

Conclusion:
The tribunal allowed the assessee's appeal regarding the addition of Rs. 3,84,57,514/- under Section 68, directing the AO to delete the addition. The issue of the validity of the reopening of assessment under Section 147 was deemed infructuous and dismissed. The appeal filed by the assessee was partly allowed.