2024 (7) TMI 880 - AT - Income Tax

Addition u/s 68 - unexplained cash credit found in the books of the assessee - onus of proving the source of cash receipt, which was on the assessee could not be satisfied - HELD THAT - Burden cast upon the assessee to place its explanations duly supported with corroborative evidence are found to be inadequate at both the assessment as well as appellate stage, however, in view of additional evidence, we found substance in the contentions raised by the AR, but, subject to verification of such evidence so as confirm the genuineness of the transactions. Thus, we are of the considered view that the issue raised by the department deserves to be restore to the file of AO to examine the same and decide the issue afresh in terms of facts and the provisions of law. It is also directed that the assessee shall be provided with reasonable opportunity of being heard and to produce all the significant evidence and contentions which were raised before us. Resultantly, in the interest of principle of natural justice, we set aside the order of Ld CIT(A) and restore the matter to the files of AO. Accordingly, the issues raised filed by the department is partly allowed for statistical purposes.

Issues:
1. Addition of unexplained cash credit in the books of the assessee.
2. Failure to discharge burden under section 68 of the Income Tax Act.
3. Deletion of penalty proceedings initiated by the Assessing Officer.
4. Appeal filed by the department being barred by limitation.
5. Consideration of evidence and arguments submitted by the parties.
6. Examination of the genuineness of cash deposits and related transactions.

Analysis:

Issue 1 - Addition of Unexplained Cash Credit:
The appeal by the revenue challenges the deletion of an addition of Rs. 72,42,648 on account of unexplained cash credit found in the books of the assessee. The Assessing Officer (AO) observed significant cash deposits in the bank account of the assessee's firm, which were deemed unexplained due to insufficient evidence provided by the assessee. The Commissioner of Income Tax (Appeals) approved the contentions of the assessee, leading to the current appeal.

Issue 2 - Failure to Discharge Burden under Section 68:
The department argued that the assessee failed to discharge its burden under section 68 of the Income Tax Act, pertaining to unexplained cash deposits. The AO found discrepancies in the explanations provided by the assessee regarding the source of cash receipts, leading to the addition of unexplained cash credits. The Commissioner's decision to delete the addition was contested by the department.

Issue 3 - Deletion of Penalty Proceedings:
The department raised concerns regarding the deletion of penalty proceedings initiated by the AO under section 270A(2)(a) for underreporting of income by the assessee. The Commissioner's decision in this regard was questioned in the appeal before the tribunal.

Issue 4 - Appeal Barred by Limitation:
Initially, the appeal filed by the department was noted to be barred by a 17-day limitation. However, the delay in filing the appeal was condoned based on the reasons provided by the department, allowing the appeal to proceed.

Issue 5 - Consideration of Evidence and Arguments:
The tribunal considered the evidence and arguments submitted by both parties, including documents such as cash book, ledger accounts, and additional evidence presented during the proceedings. The genuineness of cash receipts and the adequacy of explanations provided by the assessee were thoroughly examined.

Issue 6 - Examination of Genuineness of Cash Deposits:
The genuineness of cash deposits, especially during the demonetization period, was a focal point of the case. The department contended that the assessee failed to substantiate the cash receipts with essential documents like purchase invoices and booking details. The tribunal emphasized the importance of verifying the evidence to confirm the authenticity of the transactions.

In conclusion, the tribunal set aside the Commissioner's order and restored the matter to the AO for re-examination, emphasizing the need for the assessee to provide substantial evidence to support their explanations. The appeal of the revenue was partly allowed for statistical purposes, ensuring the principles of natural justice were upheld.

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