2014 (11) TMI 764 - AT - Income Tax

Appeal allowed by ITAT Hyderabad on cash deposit issue, transactions deemed genuine with detailed evidence.

The ITAT Hyderabad allowed the assessee's appeal, overturning the decision to treat cash deposits in bank accounts as unexplained income. The ITAT found ... Rejection of explanation offered by assessee – Credits confirmed as appearing in bank account – Held that:- Assessee has genuinely explained the whole arrangement - assessee was also present in the court room and admitted that he has taken some benefit from his friend when he was unemployed and with that loyalty, he accommodated his friend in providing finance to his business of Airtel Relationship centre - It is general practice in the market that some of the shops are accommodating credit card holders by providing cash on discount of 3% to 4% and as seen from the transactions of M/s. Gandhi Jewellers and Srikrishna Sarees and periodic purchases from them and repayments to the credit cards do indicate that funds are obtained in this manner for Mr. Srinivas business purposes and these are only temporary finance arrangement undertaken to help assessee’s friend - It is a fact that Mr. Srinivas has defaulted and present whereabouts are not known to assessee - the other evidences furnished by assessee should have been considered by Revenue - Since the overwhelming evidence furnished by assessee does indicate that the transactions are undertaken to help his friend in getting temporary finance for his business and since Mr. Srinivas repaid the amounts to a large extent out of total transactions, deposits in the bank account cannot be considered as unexplained - As seen from the credit card statements as well as bank statements, there are payments to Airtel also which indicates that Mr. Srinivas had Airtel business transactions – the authorities were not justified in treating the cash deposits as income of assessee as unexplained - Since assessee has given bonafide explanation which is not disproved, the same should be accepted – there is no reason to assess the entire cash deposits made periodically into the bank account for repayment of credit card amounts cannot be considered as income of the assessee – the order of the CIT(A) is set aside – Decided in favour of assessee. Issues:Explanation of cash deposits in bank account as unexplained incomeAnalysis:The case involved an appeal against the Order of Ld. CIT(A)-II, Hyderabad for the A.Y. 2008-09 regarding cash deposits in the assessee's bank accounts. The Assessing Officer (A.O.) questioned the source of cash deposits totaling Rs. 28,87,650 and the assessee explained that the money was withdrawn using credit cards and given to a friend running an 'Airtel relationship centre'. The A.O. issued summons to the friend, but they were returned unserved, leading to the conclusion that the explanation was not proven, resulting in the addition of Rs. 27,82,060 as unexplained income.Before the Ld. CIT(A), the assessee provided evidence of credit card transactions, bank deposits, and repayment to credit cards. The assessee's father also corroborated the explanation, detailing the financial arrangements made with the friend. However, the Ld. CIT(A) did not accept the contentions, stating that the assessee failed to substantiate the claim with evidence from the friend. The onus was on the assessee to prove the source of deposits, which was not met according to the Ld. CIT(A).During the appeal before the ITAT Hyderabad, detailed evidence was presented, including credit card statements, bank settlements, and agreements with the friend. The ITAT noted the genuine nature of the transactions, the settlement receipt provided by the friend, and the father's settlement of credit card dues, indicating the transactions' authenticity. The ITAT found that the deposits were temporary finance arrangements to assist the friend's business, supported by the credit card and bank statements. The ITAT disagreed with the A.O. and Ld. CIT(A)'s decision to treat the deposits as unexplained income, stating that the evidence presented by the assessee was sufficient to prove the legitimacy of the transactions.In conclusion, the ITAT allowed the assessee's appeal, emphasizing the genuine nature of the transactions and the lack of justification for treating the cash deposits as unexplained income. The ITAT found the assessee's explanation to be bona fide and supported by substantial evidence, leading to the deletion of the addition made by the authorities.