2020 (2) TMI 415 - AT - Income Tax

Section 68 upheld for unexplained bank cash deposits, enhancement set aside for lack of show-cause, interest addition sustained

Sri Jagdish Prasad Sharma, C/o. Mr. Sandeep Bhatnagar Versus ITO, Ward-1 (3), Ghaziabad

ITAT DELHI - AT held that cash deposits in bank fall within section 68 following precedent, dismissing the assessee's additional ground. However, the ... Unexplained cash credits u/s 68 - Admission of additional ground - cash deposited in savings bank account covered under section 68 or not? - assessee does not maintain the books of account - HELD THAT:- Identical issue has been decided in SHRI JANAK GOEL VERSUS DCIT, CENTRAL CIRCLE-4, NEW DELHI [2019 (5) TMI 887 - ITAT DELHI] to hold that the cash deposited by the assessee in his bank account is also covered under section 68 of the income tax act. Thus the additional ground raised by the assessee is dismissed. Enhancement of income by the CIT(A) u/s 251 - Held that:- before making any enhancement to the income of the assessee determined by the learned Assessing Officer, the learned CIT(A) should have granted the assessee an opportunity of showing that the order of the learned CIT(A) making an addition u/s 68 of the Income Tax Act should not be enhanced. - Relief granted to assessee. Addition u/s 68 - According to section 251(2) the learned Commissioner of Income Tax(A) is empowered to enhance in assessment order penalty or reduced the amount of refund. However, there is a basic precondition that the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. Before making any enhancement to the income of the assessee determined by AO, the learned CIT(A) should have granted the assessee an opportunity of showing that the order of the learned CIT(A) making an addition u/s 68 of the Income Tax Act should not be enhanced. On careful reading of the order of the CIT(A) we do not find that any such notice has been issued by CIT(A) proposal enhancement of the income of the assessee. In view of this the enhancement made by the learned CIT(A) of the addition is not sustainable in law on the principles of natural justice not followed by him. Therefore we direct the learned assessing officer to restricted the addition to the extent u/s 68 of the Act and assessee is granted relief to that extent. Accordingly ground number 2 of the appeal of the assessee is allowed. Addition of gifts of loans - assessee has also failed to show the genuineness of the transaction of receipt of the sale of land for the reason that there is no sale taken place of any agricultural land by the assessee against the above advance. Further, the learned assessing officer as well as the learned CIT(A) has examined the creditworthiness of each and every credit shown by the assessee. Looking to the meagre income shown by the depositors, absence of any evidence and source of deposit of cash available with them, failure to produce evidence of the consequent sale of land, failure to show the names of the witness to the sale agreement, shows that assessee has failed to show the creditworthiness of the depositors against sale of land as well as of the gift. In view of this we do not find any infirmity in the order of the learned assessing officer in making the addition u/s 68 of the income tax act to the extent of INR 1,975,000 out of the total cash deposit of ₹ 24.50 Lacs in the bank account of the assessee. In view of this ground No. 1 of the appeal of the assessee is dismissed. Addition on account of bank interest - assessee has a savings bank interest income which is chargeable to tax under that income from other sources - HELD THAT:- No arguments were advanced by the assessee on this ground of appeal. We also do not find any infirmity in making the addition in the hands of the assessee as assessee has earned net bank interest of ₹ 22365/-. Accordingly ground No. 3 of the appeal of the assessee is dismissed. Issues Involved:1. Legality of assessment under Section 143(3) of the Income Tax Act, 1961.2. Validity of invoking Section 68 in the absence of proper books of accounts.3. Creditworthiness of persons who advanced money to the assessee.4. Opportunity to the assessee to explain his case.5. Gifts received by the assessee and their justification.6. Enhancement of income by CIT(A).7. Addition of bank interest income.8. Levy of interest under Sections 234A and 234B.9. Allegation of furnishing inaccurate particulars leading to concealment of income.Detailed Analysis:1. Legality of Assessment under Section 143(3):The assessee argued that the assessment was arbitrarily framed without considering the facts explained and submitted. The Income Tax Officer presumed that the persons who advanced money to the assessee did not have the sources to pay the amount. The Tribunal found that the assessee provided agreements of sale and produced the buyers who confirmed the payments. However, the Income Tax Officer ignored the explanations and presumed the sources of the sources, which is not required under the law.2. Validity of Invoking Section 68:The Tribunal admitted the additional ground raised by the assessee challenging the invocation of Section 68 in the absence of proper books of accounts. It was held that even if the assessee does not maintain any books of accounts, the amount deposited in the bank account can be considered under Section 68. The Tribunal relied on various judicial precedents to support this view.3. Creditworthiness of Persons Who Advanced Money:The Tribunal analyzed the creditworthiness of the persons who advanced money to the assessee. The Income Tax Officer recorded statements of these persons and found discrepancies. The Tribunal noted that the assessee failed to prove the genuineness and creditworthiness of the transactions. The Tribunal upheld the additions made by the Income Tax Officer and enhanced by the CIT(A), except where the CIT(A) did not provide an opportunity to the assessee for enhancement.4. Opportunity to the Assessee to Explain His Case:The assessee argued that the principles of natural justice were violated as he was not given an opportunity to explain his case after the statements of the buyers were recorded. The Tribunal found that the statements were provided to the assessee during remand proceedings, and he failed to avail the opportunity to prove his case. The Tribunal held that the additions were justified.5. Gifts Received by the Assessee and Their Justification:The assessee claimed to have received gifts from family members on his 25th marriage anniversary. The Tribunal found that the assessee failed to prove the genuineness and creditworthiness of the gifts. The Tribunal upheld the additions made by the Income Tax Officer and enhanced by the CIT(A) where justified.6. Enhancement of Income by CIT(A):The Tribunal noted that the CIT(A) enhanced the income without providing an opportunity to the assessee, which is against the principles of natural justice. The Tribunal directed the Income Tax Officer to restrict the addition to the extent made by the Income Tax Officer and not the enhanced amount by the CIT(A).7. Addition of Bank Interest Income:The Tribunal upheld the addition of Rs. 22,365 on account of bank interest as the assessee failed to advance any arguments against this addition.8. Levy of Interest under Sections 234A and 234B:The Tribunal did not specifically address this issue separately, implying that the levy of interest under Sections 234A and 234B was upheld as per the assessment.9. Allegation of Furnishing Inaccurate Particulars Leading to Concealment of Income:The Tribunal did not find specific grounds to address this issue separately, implying that the assessment of concealment of income under Section 271(1)(c) was upheld based on the findings related to unexplained cash credits and gifts.Conclusion:The appeal was partly allowed with directions to restrict the addition under Section 68 to Rs. 1,975,000 and uphold other additions and findings of the Income Tax Officer and CIT(A) where justified. The Tribunal emphasized the importance of proving the genuineness and creditworthiness of transactions and adhering to principles of natural justice in assessments.