2012 (10) TMI 428 - AT - Income Tax

ITAT Upholds FAA Decisions on Unexplained Cash Deposits

Income Tax Officer 25(3)(3), Versus Shri Pethabhai Babubhai Patel,

The ITAT dismissed the Revenue's appeal, upholding the FAA's decisions on unexplained cash deposits, applicability of Section 50C, re-deposit of funds, ... Applicability of Sec.50C of the Act - Held that:- sec 50C is not applicable on transfer of lease hold right - Decided against the revenue. Addition on Redeposit - Held that:- After considering the submissions of the remand report and examining the bank account, it was found that the appellant had withdrawn cash of Rs.7,25,000/- before depositing Rs.7,50,000/, In the circumstances, there is no necessity for addition of Rs.7,50,000/. The addition is restricted to Rs.25,000/- as the balance amount is explained by the withdrawal from the same bank account on the earlier dates - against Revenue. Addition on Cash Deposit of Rs.3,00,000/- Held that:- Alternate claim of the assessee could not be rejected, especially when AO was re-opening the assessment for the AY 2005-06 for verifying the source of payment for purchase of lease right. Here, it is also noteworthy that where AO has passed a non-speaking order, but the FAA had discussed the issue in length. Not only this he rejected the claim of the assesse with regard to Agricultural income. Thus stand taken by the FAA does not suffer from any infirmity - against the Revenue. Issues:1. Unexplained cash deposits2. Applicability of Section 50C of the Income Tax Act3. Re-deposit of funds by the assessee4. Cash deposit of Rs.3 LakhsUnexplained Cash Deposits:The appellant, engaged in the general store business, faced scrutiny for unexplained cash deposits totaling Rs.7,25,000. The AO added these amounts to the total income, alleging they were not satisfactorily explained. The FAA called for a remand report and directed the AO to examine the transfer of lease rights. The AO confirmed certain deposits but found discrepancies in others. The FAA, based on the remand report, deleted the addition of Rs.4.25 lakhs but upheld the addition of Rs.3 lakhs. The ITAT upheld the FAA's decision, finding it fair and logical.Applicability of Section 50C:The AO claimed that Section 50C applied to a property sale, but the FAA found otherwise. The FAA noted that the lease rights transfer did not fall under Section 50C. The ITAT, following precedents, dismissed the appeal, concluding that Section 50C did not apply to the transfer of leasehold rights.Re-deposit of Funds:The AO questioned a re-deposit of Rs.7.5 lakhs by the assessee, which the FAA reviewed. The FAA observed the submissions made by the appellant and the lack of comments from the AO on additional evidence. The FAA restricted the addition to Rs.25,000, as the balance was explained by earlier withdrawals. The ITAT upheld the FAA's decision, finding it reasonable and justifiable.Cash Deposit of Rs.3 Lakhs:The AO added Rs.3 lakhs as cash deposit from undisclosed sources. The FAA considered additional evidence submitted by the appellant and directed the AO to discuss the issue. The FAA found discrepancies in the AO's handling of the case and accepted the alternate claim of the appellant regarding the source of the deposit. The ITAT upheld the FAA's decision, noting the thorough analysis and rejection of the appellant's agricultural income claim.In conclusion, the ITAT dismissed the appeal by the Revenue, upholding the decisions made by the First Appellate Authority in each issue raised. The judgments were based on detailed assessments, submissions, and legal interpretations, ensuring a fair and just outcome in each instance.