2024 (11) TMI 1095 - AT - Income Tax

Addition of cash deposits as unexplained money - there was no proof of the assessee carrying on the business of the appellant dealing with stationery and general stores - HELD THAT - As perused the copy of the statement of the bank account held by the appellant with ICICI Bank. From the perusal of the said statement, it would reveal that there was cash deposits followed by withdrawals as well. Without entering into any controversy, whether the appellant had really carried on the business or not, it would be suffice to hold that the amount withdrawn from the Bank account by cash, should be treated as available for the subsequent deposits in the bank account, in the absence of any evidence on record to show the utilization of the withdrawn amount. Thus, the lower authorities, i.e. the AO as well as the learned CIT (A) should have given the benefit of telescoping of withdrawals against the subsequent deposits. Therefore, the approach adopted by the AO as well as the learned CIT (A) is totally unjustified and unreasonable. In order to meet the ends of justice, we deem it proper to remand the matter back to the file of the AO with a direction that the amount withdrawn from the Bank Account by way of cash should be treated as available against the subsequent deposits and the balance, if any, can be brought to tax and the balance amount, if any, as reduced by the amount of returned income may be brought to tax.

Summary

Issues:
- Addition of cash deposits as unexplained money
- Benefit of telescoping of withdrawals against subsequent deposits
- Levy of penalty u/s 271(1)(c) of the I.T. Act, 1961

Analysis:

Issue 1: Addition of cash deposits as unexplained money
The appellant, engaged in trading, had cash deposits in a bank account leading to an assessment where the Assessing Officer added the total income based on these deposits. The CIT (A) confirmed the addition, citing lack of evidence on the source of cash deposits. The Tribunal remitted the matter back to the Assessing Officer for denovo assessment. The Assessing Officer reiterated the additions, which the CIT (A) upheld. However, the Tribunal found that withdrawals should be telescoped against subsequent deposits. It held that the Assessing Officer's approach was unjustified and unreasonable, directing a reassessment considering the withdrawals against deposits to determine the taxable amount. The appeals were partly allowed.

Issue 2: Benefit of telescoping of withdrawals against subsequent deposits
The Tribunal emphasized that withdrawals from the bank account should be considered available for subsequent deposits unless proven otherwise. It criticized the lower authorities for not allowing the benefit of telescoping withdrawals against deposits. The Tribunal's decision to remand the matter back to the Assessing Officer was based on the principle that withdrawn amounts should be adjusted against subsequent deposits before determining the taxable balance.

Issue 3: Levy of penalty u/s 271(1)(c) of the I.T. Act, 1961
The appeals against the levy of penalties under section 271(1)(c) were restored to the Assessing Officer due to the quantum appeals being remitted. The Tribunal allowed these appeals for statistical purposes, indicating that the penalty issue would be reconsidered by the Assessing Officer in line with the reassessment directed for the quantum appeals.

In conclusion, the Tribunal's judgment focused on rectifying the unjustified addition of cash deposits as unexplained money by directing a reassessment considering the telescoping of withdrawals against subsequent deposits. The penalty issue was restored for reconsideration along with the quantum appeals.