2024 (12) TMI 41 - AT - Income Tax

Unexplained money u/s. 69A - cash deposited in bank account of the appellant - HELD THAT - As decided in SMT. PK NOORJAHAN 1997 (1) TMI 6 - SUPREME COURT deliberating on the term may used in Section 69 said Income-tax Officer is not obliged to treat the source of investment as income in every case where the explanation offered by the assessee is found to be not satisfactory. It was further observed that the question as to whether the source of the investment should be treated as income or not u/s. 69 of the Act has to be considered in the light of the facts of each case. Discretion has been conferred on the Income-tax Officer u/s. 69 of the Act to treat the source of investment as the income of the assessee if the explanation offered by the assessee is not found satisfactory and the said discretion has to be exercised keeping in view the facts and circumstances of the particular case. As the assessee in the present case had failed to come forth with any plausible explanation both before the A.O/CIT(Appeals) as regards the source of the cash deposits in his bank account, therefore, we principally concur with the view taken by them. But it would be incorrect to not consider the fact that the assessee being a 44 years old commerce graduate would have some amount of cash in hand out of his past savings/current years income in his possession, viz. (i) private job with New Creative Fibre; (ii) wholesale business in the name of Suman Combines ; and (iii) past accumulated savings as on the date of making the cash deposits in his bank account. We firm conviction that an amount can safely be held that he would have been in possession of the assessee at the time of depositing of cash in his bank account during the year under consideration. Accordingly,we scale down the addition made by the A.O to Rs. 17.91 lacs Rs.19.71 lacs (-) Rs. 2 lacs . Assessee appeal partly allowed.

Summary

Issues Involved:

1. Legitimacy of the addition of Rs. 19,71,000/- as unexplained money under Section 69A of the Income-tax Act, 1961.
2. Procedural compliance and non-participation in appellate proceedings.
3. Onus of proof regarding the source of cash deposits.

Detailed Analysis:

1. Legitimacy of the Addition as Unexplained Money under Section 69A:

The primary issue revolves around the addition of Rs. 19,71,000/- made by the Assessing Officer (A.O) as unexplained money under Section 69A of the Income-tax Act, 1961. The A.O initiated proceedings under Section 147 based on information that the assessee had made significant cash deposits but had not filed a return of income for the assessment year 2014-15. The assessee claimed that the cash deposits were sourced from past savings, commission income, and gifts received from his father and at the time of his marriage. However, the A.O found these explanations unsatisfactory as the assessee failed to substantiate his claims with evidence. Consequently, the A.O treated the cash deposits as unexplained income, relying on judicial precedents that place the onus on the assessee to prove the source of such deposits.

2. Procedural Compliance and Non-Participation in Appellate Proceedings:

The assessee appealed the A.O's decision before the Commissioner of Income-Tax (Appeals) [CIT(A)], but failed to participate in the proceedings despite being given opportunities. The CIT(A) proceeded ex-parte and upheld the A.O's addition, citing the principle that the law aids those who are vigilant. The CIT(A) emphasized that the onus was on the appellant to prove the genuineness of transactions, referencing case law that supports the dismissal of appeals for non-prosecution. The CIT(A) confirmed the addition due to the absence of any material evidence from the assessee to counter the A.O's findings.

3. Onus of Proof Regarding the Source of Cash Deposits:

The Tribunal reviewed the case, focusing on whether the assessee satisfactorily explained the source of the cash deposits. The Tribunal noted that the assessee's explanations lacked evidentiary support, particularly concerning the claimed gifts and past savings. The Tribunal highlighted the statutory obligation under Section 69A for the assessee to explain the nature and source of the money. While the assessee argued that the cash deposits were utilized for personal investments, the Tribunal found this insufficient to substantiate the source of the funds. However, acknowledging the possibility of some cash being accumulated from legitimate sources, the Tribunal partially allowed the appeal by reducing the unexplained addition by Rs. 2 lacs, thereby scaling down the addition to Rs. 17.91 lacs.

Conclusion:

The Tribunal's decision reflects a balanced approach, recognizing the procedural lapses and lack of evidence from the assessee while also considering the potential for some legitimate savings. The appeal was partly allowed, reducing the unexplained income addition, but reaffirming the principle that the burden of proof lies with the taxpayer to substantiate the source of cash deposits.