2023 (1) TMI 854 - AT - Income Tax

Unexplained cash credit u/s 68 - cash deposits in bank by treating the same as unexplained - contention of the learned AR was that the impugned cash deposit was made out of the agriculture income - HELD THAT - Assessee before the authorities below has not furnished any documentary evidence suggesting that the assessee has earned from the source of agricultural operation. Also observed by the authorities below that the assessee was not even in the possession of agricultural land. Agricultural land as evident from form 8-A, it was noticed that such piece of land admeasuring 5.5 vigha was owned by her father-in-law along with 6 other co-owners. Three co-owners of the impugned land have already claimed to have deposited cash in their bank accounts out of the income from the agricultural operations from such piece of land. In such facts and circumstances, it is hard to believe the version of the learned counsel for the assessee. The onus lies upon the assessee to justify her contention based on the materials/documents on record about the agricultural operations carried out by her. Accordingly, no reason to interfere in the order of the learned CIT-A as far as this contention of the learned AR is concerned. Assessee has received cash from two parties for making the investment in the IPO which was deposited in the bank account of the assessee - This contention was raised by the assessee 1st time before the learnedCIT(A) in the rejoinder filed by her against the remand report furnished by the AO. As such this contention was not raised by the assessee during the assessment and remand proceedings. Documents filed by the learned AR were considered by the learned CIT-A as the documents prepared afterthought to justify the deposit of cash in the bank account and therefore the same were rejected. However, in the interest of justice and fair play, we inclined to give one more opportunity to the assessee by setting aside this issue to the file of the AO for fresh adjudication as per the provisions of law. Even at the time of hearing, the learned DR did not oppose if the matter is set aside to the file of the AO for fresh adjudication as per the provisions of law. Thus, the contention raised by the learned AR is set aside to the file of the AO for fresh adjudication as per the provisions of law. Contended by the learned AR that there was opening cash balance as on 1st April 2009 which was utilized for depositing the bank account in the year under consideration - Admittedly, there was no documentary evidence furnished by the assessee in support of the opening cash balance therefore it is hard to believe that there was cash balance available with the assessee. But, considering the amount involved as the opening balance, the possibility of having the same out of the past savings cannot be ruled out. Accordingly, we direct the AO to give the benefit of opening balance if any addition is sustained in the hands of the assessee on account of cash deposits in the year under consideration. Alternate contention of the learned AR to take the peak balance of cash deposit as the income of the assessee - Authorities below denied the benefit to the assessee on the reasoning that there was no cash withdrawal. It is the factual matter which can be established based on the documentary evidence. As such the assessee is directed to justify the withdrawal of cash from the bank account based on the documentary evidence. It is for the reason that once the cash has been withdrawn by the assessee then a presumption can be drawn that such cash was available with the assessee for depositing the same in the bank account until and unless it was held by the revenue based on the documentary evidence that such cash has been utilized for incurring the personal expenses or for making the investment. But no such finding was provided by the revenue about the utilization of such cash withdrawal from the bank. Thus, we hold that such cash withdrawal was available with the assessee for depositing the same in the bank account provided that the assessee furnishes the documentary evidence during the set-aside proceedings before the AO. Hence this contention of the learned AR is also set aside to the AO for fresh adjudication - Appeal filed by the assessee is partly allowed for the statistical purposes.

Summary

Issues Involved:
1. Validity of reopening the assessment under section 147 of the Income Tax Act.
2. Addition of Rs. 12,79,000/- as unexplained cash credit under section 68 of the Act.
3. Consideration of opening cash balance and peak credit theory for cash deposits.

Issue-wise Detailed Analysis:

1. Validity of Reopening the Assessment:
The first issue raised by the assessee was regarding the validity of reopening the assessment under section 147 of the Income Tax Act. The assessee's representative submitted that this ground should not be pressed. Consequently, the tribunal dismissed this ground as not pressed.

2. Addition of Rs. 12,79,000/- as Unexplained Cash Credit:
The primary issue was the confirmation of the addition of Rs. 12,79,000/- as unexplained cash credit under section 68 of the Act. The assessee did not file a return of income for the relevant year and failed to respond to notices issued under section 142(1). The Assessing Officer (AO) treated the cash deposit of Rs. 23,29,100/- as unexplained cash credit. Upon appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] partially confirmed the addition, reducing it to Rs. 12,79,000/-.

The assessee argued that the cash deposits were from the sale of agricultural produce, withdrawals from the bank, and personal savings. The CIT(A) rejected this claim, noting that the agricultural land was jointly owned by multiple parties and that the income claimed from such a small piece of land was implausible. The CIT(A) also observed that no withdrawals were made from the HDFC bank account to support the peak credit theory.

3. Consideration of Opening Cash Balance and Peak Credit Theory:
The assessee contended that the cash deposits were partly from an opening cash balance of Rs. 2,08,900/- and requested the application of the peak credit theory. The CIT(A) rejected these claims due to the lack of documentary evidence and the fact that the bank account with Karur Vysya Bank was considered in the hands of a joint holder, not the assessee.

The tribunal noted that the assessee provided affidavits and ledger copies to support the claim that cash was received from parties for IPO investments. The tribunal decided to give the assessee another opportunity to present this evidence before the AO for fresh adjudication. Additionally, the tribunal directed the AO to consider the opening cash balance of Rs. 2,08,900/- and any cash withdrawals from the bank account when reassessing the case.

Conclusion:
The tribunal allowed the appeal partly for statistical purposes, directing the AO to re-examine the evidence regarding the cash deposits, opening cash balance, and peak credit theory. The AO is to conduct a fresh adjudication based on the documentary evidence provided by the assessee.