2023 (9) TMI 1415 - AT - Income Tax

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 ... Addition on account of cash deposits in bank account of HDFC Bank - unexplained investment u/s.69A - HELD THAT:- We note that the details of contra-entry/ cancelled cheques, are there in the bank statement and the AO could have examined these contra-entries suo moto while making the assessment, however the AO has failed to do so. Therefore, just to file a summary of the same bank statement, (which was available in the file the AO), by the assessee, before the Bench, in the form of contraentry (cheque dishonour), is not an additional evidence, as these contra-entries / (cheque dishonour) details were available in the bank statement, which could be examined by the Assessing Officer, during the assessment stage. Therefore, I note that the details of contra-entry/ cancelled cheques were on the file of the Assessing Officer, hence the second inning should not be given to the assessing officer to examine the same facts again. We note that the total credit in the bank statement, after eliminating contra-entries, comes to Rs.23,24,831/-. Therefore, to meet the end of justice an addition at the rate of 5% on total credit in the bank statement may be a reasonable addition in the hands of the assessee. For this, we rely on the judgment of Smt. Krushangi Keyur Bhagat vs ITO [2018 (9) TMI 2093 - ITAT SURAT] wherein the Tribunal sustained the addition at the rate of 5% of total deposits. 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.