2015 (4) TMI 1277 - AT - Income Tax

Tribunal overturns tax assessment, grants opportunity to prove source of cash deposit

Smt. Ramwati (Raj). Versus The I.T.O. Ward 2, Bharatpur

Smt. Ramwati (Raj). Versus The I.T.O. Ward 2, Bharatpur - TMI Issues Involved:1. Confirmation of addition of Rs. 52 lacs as unexplained cash deposit under Section 68 of the Income Tax Act, 1961.2. Application of Section 68 to deposits in bank accounts.3. Burden of proof regarding the source of cash deposits.4. Relevance and application of judicial precedents.Issue-wise Detailed Analysis:1. Confirmation of Addition of Rs. 52 Lacs as Unexplained Cash Deposit under Section 68:The primary issue revolves around the addition of Rs. 52 lacs made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961, which was confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The AO observed that the assessee deposited Rs. 72 lacs in cash on 11/05/2009 in her bank account but could only substantiate Rs. 20 lacs as the sale proceeds of agricultural land as per the registered sale deed. The remaining Rs. 52 lacs was claimed to be received from the purchaser, Smt. Kiran Devi, but no satisfactory evidence was provided to support this claim. The CIT(A) upheld the AO's decision, stating that the assessee failed to prove the identity, creditworthiness of the creditor, and the genuineness of the transaction.2. Application of Section 68 to Deposits in Bank Accounts:The assessee argued that Section 68 does not apply to bank deposits as it pertains to credits in the books of accounts, and the bank passbook is not considered a book of accounts. The assessee cited judicial precedents, including CIT Vs. Bhaichand H Gandhi (Bom) and Ms. Mayawati Vs. DCIT (Delhi), to support this contention. However, the Tribunal noted that the primary burden to prove the cash deposit lies on the assessee, which was not fully discharged.3. Burden of Proof Regarding the Source of Cash Deposits:The Tribunal emphasized that the initial burden to prove the source of cash deposits lies on the assessee. The assessee claimed to have received Rs. 72 lacs from the sale of agricultural land but could not produce the buyer, Smt. Kiran Devi, for examination. Despite multiple opportunities provided by the AO, the assessee failed to substantiate the source of the Rs. 52 lacs deposit. The Tribunal observed that sufficient time was provided to the assessee to produce evidence, but the burden was not adequately discharged.4. Relevance and Application of Judicial Precedents:The Tribunal considered various judicial precedents cited by both parties. The CIT(A) relied on cases such as Ramlal Agarwal Vs. CIT and Vijay Kumar Talwar Vs. CIT, which supported the AO's decision. The assessee cited the Supreme Court decision in CIT vs. P.K. Noorjehan, arguing that in cases where the source of income is not satisfactorily explained, the AO has discretion under Section 69 to decide whether to treat the source as income. The Tribunal acknowledged these precedents but found them not directly applicable to the present case.Conclusion:The Tribunal concluded that the assessee failed to fully discharge the burden of proving the source of the Rs. 52 lacs cash deposit. However, in the interest of justice, the Tribunal set aside the order of the CIT(A) and remanded the matter back to the AO to provide one more opportunity to the assessee to explain the source of the cash deposit. The assessee's appeal was allowed for statistical purposes only. The Tribunal emphasized the need for the assessee to substantiate the source of the deposit with credible evidence in the remand proceedings.