Telescoping of earlier disclosed income allowed, so separate addition for cash deposits was deleted to avoid double taxation.

ITAT Kolkata held that cash deposits in bank accounts were not separately taxable where the assessee had already disclosed and paid tax on undisclosed income in earlier years. The Tribunal found that the earlier disclosed income was sufficient to cover the impugned deposits and that the deposits were traceable to the same pool of funds. On that basis, separate addition would amount to double taxation, so telescoping was allowed and the unexplained cash deposit addition was deleted.

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Issues: Whether the addition made on account of cash deposits in bank accounts was sustainable when the assessee had already disclosed and suffered tax on undisclosed income for earlier assessment years, so as to justify telescoping of the impugned amount.

Analysis: The assessee had shown other receivables and other balances in the earlier years and had already offered undisclosed income to tax. The impugned cash deposits were found to be explainable as part of the same pool of disclosed undisclosed income. In these circumstances, making a separate addition in the year under consideration would amount to taxing the same income again. The Tribunal held that the amount assessed in the earlier years was more than sufficient to cover the deposits in dispute and that no separate addition on account of unexplained cash deposits was warranted.

Conclusion: The addition on account of undisclosed cash deposits was deleted and the issue was decided in favour of the assessee.

Ratio Decidendi: Where an assessee has already offered undisclosed income to tax in earlier years and the impugned cash deposits are traceable to that disclosed income, separate addition for the same amount is not sustainable and telescoping must be allowed to avoid double taxation.

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