2022 (11) TMI 383 - AT - Income Tax

Unexplained Cash deposit - HELD THAT - On going through the paper book and the documents, we find that the source of cash deposit has been duly explained and the authorities below have erred in not accepting the same. The Revenue has not disputed that any item in paper book is fresh document being filed for the first time before the ITAT. Hence, in the background and examination of the aforesaid document, perusing of the records and hearing the learned counsel, we are of the considered opinion that cash deposits in this case has been duly explained. Hence, we direct that the addition be deleted. As regards, the addition of interest income, in absence of any explanation about them we confirm the order of the authorities below on this issue. Hence, the appeal of the assessee is partly allowed.

Issues Involved:
1. Validity of proceedings under Section 147 read with Section 148.
2. Legitimacy of reassessment proceedings.
3. Independent application of mind by the Assessing Officer.
4. Treatment of bank deposits as undisclosed income.
5. Addition of interest income.

Detailed Analysis:

1. Validity of proceedings under Section 147 read with Section 148:
The assessee contended that the initiation of proceedings under Section 147, read with Section 148, was invalid as the conditions and procedures prescribed under the statute were not satisfied. The Assessing Officer initiated proceedings based on information received about significant cash deposits in the assessee's bank account, which the assessee failed to explain satisfactorily. The Tribunal noted that the Assessing Officer had reasons to believe that income chargeable to tax had escaped assessment, justifying the initiation of proceedings under Section 147.

2. Legitimacy of reassessment proceedings:
The assessee argued that the reassessment proceedings were invalid as the reasons recorded for issuing the notice under Section 148 were contrary to the facts. The Assessing Officer noted that the assessee had not filed an income tax return for the relevant year and had made substantial cash deposits. The Tribunal found that the reasons recorded by the Assessing Officer were adequate to justify the reassessment proceedings.

3. Independent application of mind by the Assessing Officer:
The assessee claimed that the order passed by the Assessing Officer was based on reasons recorded without any independent application of mind. The Tribunal observed that the Assessing Officer had thoroughly examined the evidence and explanations provided by the assessee, including the sale deed and bank statements, before concluding that the cash deposits were unexplained. Thus, the Tribunal found no merit in the assessee's claim.

4. Treatment of bank deposits as undisclosed income:
The primary issue was the addition of Rs.73,99,000/- as undisclosed income based on cash deposits in the assessee's bank account. The assessee explained that the deposits were from the sale of agricultural land and advances received. The Tribunal noted that the assessee provided substantial evidence, including the sale deed, agreement to sell, and bank statements, to support the claim that the cash deposits were from legitimate sources. The Tribunal found that the authorities below erred in not accepting the assessee's explanation and directed that the addition be deleted.

5. Addition of interest income:
The Assessing Officer added Rs.3,626/- as interest income not offered for taxation. The Tribunal confirmed this addition in the absence of any explanation from the assessee regarding the interest income. Thus, this part of the order was upheld.

Conclusion:
The Tribunal concluded that the cash deposits were duly explained and directed the deletion of the addition related to the cash deposits. However, the addition of interest income was confirmed. The appeal was partly allowed, with the order pronounced in the open court on 04th November 2022.

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