2015 (3) TMI 1352 - AT - Income Tax

Tribunal upholds assessee's explanation, dismisses Revenue's appeal under Income Tax Act

The Tribunal dismissed the Revenue's appeal, affirming the Commissioner's decision to delete a substantial portion of the addition under section 68 of the ... Addition u/s 68 - genuineness, credit worthiness and identity of creditor - HELD THAT:- The assessee's version of truth was placed before A.O. also, but A.O. did not find any evidence contrary to above facts. CIT(A) further observed that the assessee’s husband was working in Meghalaya House and he used to come across the friend Mr. W. Sutong in the Meghalaya House. When the assessee and her husband purchased a house, they had discussed the matter with the Mr. W. Sutong and Mr. W. Sutong agreed to pay them ₹ 16,18,000/- by cash in their bank account but later on they realized that they being in the government service, it is not proper to get loan from stranger. There will be problems for them and they returned the money immediately to the appellant's bank account by RTGS. The above submission of refund of money is available on record. Therefore, ₹ 15,80,000/- was returned by assessee's husband from their joint account to Mr. W. Sutong. Hence, in our considered opinion, the CIT(A) has rightly gave a relief to the assessee of ₹ 15.80 Lakh. In the background of the aforesaid detailed discussions, we find that Ld. CIT(A) has rightly deleted the addition of ₹ 15,80,000/- and sustained the balance addition of ₹ 38,000/-. - Decided against revenue Issues Involved:Appeal against deletion of addition on account of unexplained cash deposit in bank account under section 68 of the Income Tax Act, 1961. Acceptance of additional evidence without allowing the Assessing Officer to submit a Remand Report. Failure to verify the nature, source, and capacity of the cash deposit in the saving bank account.Analysis:Issue 1: Addition of Unexplained Cash DepositThe Department contested the deletion of an addition of Rs. 15,81,000 made under section 68 of the Income Tax Act, 1961, regarding an unexplained cash deposit in the assessee's bank account. The Commissioner of Income Tax (Appeals) accepted the explanation provided by the assessee, which included an affidavit, bank passbook, and the identity of the person depositing the cash. The Commissioner found the explanation satisfactory, noting that the source and identity of the depositor were adequately explained. The Tribunal upheld the Commissioner's decision, emphasizing that the assessee's husband had returned the amount to the depositor, Mr. W. Sutong, due to concerns about accepting a loan from a non-relative. Consequently, the Tribunal dismissed the appeal, affirming the deletion of Rs. 15,80,000 from the addition.Issue 2: Acceptance of Additional EvidenceThe Department raised a concern about the acceptance of additional evidence without providing the Assessing Officer an opportunity to submit a Remand Report, alleging a violation of Rule 46A. However, the Tribunal found that the Commissioner had thoroughly examined the assessment order, written submissions, and grounds of appeal. The Commissioner stressed the need for the Assessing Officer to investigate and ascertain the truth, especially when presented with credible explanations and evidence. The Tribunal concurred with the Commissioner's decision to admit the additional evidence, considering the circumstances surrounding the cash deposit and the subsequent return of the funds.Issue 3: Verification of Cash DepositThe Department argued that the Commissioner erred in accepting the cash deposit without verifying its nature as a loan or gift, along with the source and capacity of the depositor. However, the Tribunal noted that the Commissioner had diligently verified the identity and creditworthiness of Mr. W. Sutong, the depositor, who was a Class-I contractor exempted from Income Tax. The Tribunal agreed with the Commissioner's findings that the deposit was a temporary arrangement between the assessee's husband and Mr. Sutong, leading to the subsequent return of the funds. Consequently, the Tribunal upheld the deletion of Rs. 15,80,000 while sustaining a balance addition of Rs. 38,000.In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the Commissioner's decision to delete the substantial portion of the addition based on the credible explanation provided by the assessee and the subsequent return of the funds.