Cash deposits in bank account cannot be treated as unexplained investment without examining contra-entries and cancelled cheques

ITAT Surat held that cash deposits in HDFC Bank account could not be treated as unexplained investment under section 69A. The AO failed to examine contra-entries and cancelled cheques available in bank statements during assessment. Since these details were already on file, no second opportunity should be given to AO to re-examine same facts. After eliminating contra-entries, total credits were Rs.23,24,831. Tribunal sustained addition at 5% of total deposits as reasonable, following precedent in Smt. Krushangi Keyur Bhagat case.

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Issues involved:
The issues involved in this judgment are the condonation of delay in filing the appeal and the addition made by the Assessing Officer on account of cash deposits in the bank account of the assessee.

Condonation of Delay:
The appeal filed by the assessee for Assessment Year (AY) 2010-11 was initially barred by a delay of eighteen days. The assessee's representative explained that the delay was due to the negligence of the advocate/consultant handling income tax matters. The Tribunal considered the reasons provided and granted condonation of delay, allowing the appeal to proceed for hearing.

Addition on Account of Cash Deposits:
During the assessment proceedings, it was discovered that the assessee held an undisclosed bank account with significant cash deposits. The Assessing Officer made an addition of Rs. 33,65,094 on account of unexplained investments, as the turnover declared by the assessee did not align with the deposits in the bank account. The assessee challenged this addition before the Tribunal.

The assessee argued that the real addition should be Rs. 23,24,831, excluding contra/returned cheques, and proposed a reasonable estimate of income at 5% of this amount. The Revenue representative requested a remittance of the issue to examine the contra-entries.

After considering the submissions and documents, the Tribunal found that the details of contra-entries were available in the bank statement and should have been examined by the Assessing Officer during the assessment. Therefore, the Tribunal upheld the assessee's contention and determined the reasonable addition at 5% of Rs. 23,24,831, following a precedent judgment. Consequently, the Tribunal directed the Assessing Officer to make an addition of Rs. 1,16,242 in the hands of the assessee, partially allowing the appeal.

Conclusion:
In conclusion, the Tribunal granted condonation of delay for filing the appeal and partially allowed the appeal of the assessee concerning the addition made by the Assessing Officer on account of cash deposits. The Tribunal directed the Assessing Officer to make a reduced addition based on a reasonable estimate of income.

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