2021 (2) TMI 1139 - AT - Income Tax

Tribunal dismisses challenge, upholds cash deposits, directs reevaluation, and emphasizes evidence in income tax appeal.

The Tribunal dismissed the challenge to the initiation of proceedings under sections 147/148 of the Income Tax Act as not pressed. The addition of cash ... Unexplained cash in the bank account maintained with HDFC account - assessee could not explain the source of such cash deposits in the bank account maintained with HDFC account on the ground that assessee could not explain the source of such cash deposits - CIT(A) upheld the action of the AO - HELD THAT:- It is the submission of assessee that such cash deposit is out of the realisation of sundry debtors and out of sale proceeds of the closing stock lying with the assessee apart from some opening cash in hand. It is also his submission that given an opportunity the assessee is in a position to explain the source of such cash deposit so made in the bank account. Restore the issue to the file of the AO with a direction to grant one final opportunity to the assessee to substantiate its case and decide the issue as per fact and law. Thus hold and direct accordingly. Grounds raised by the assessee are accordingly allowed for statistical purposes. Issues:1. Validity of initiation of proceedings under section 147/148 of the Income Tax Act2. Addition of cash deposits as unexplained income under section 68 of the Act3. Charging interest under section 234A, 234B, and 234C of the ActIssue 1: Validity of initiation of proceedings under section 147/148 of the Income Tax ActThe appeal challenged the initiation of proceedings under section 147/148 without valid reasons for believing in income escapement. The Ld. Counsel did not press this ground during the hearing, leading to its dismissal as not pressed. The AO reopened the case based on information about cash deposits exceeding Rs. 2 lakhs in the bank account. The assessee argued that the reopening was unjustified, but the Ld. CIT(A) upheld the AO's decision. The Tribunal did not delve into this issue further due to the ground being dismissed.Issue 2: Addition of cash deposits as unexplained income under section 68 of the ActThe AO added Rs. 6,71,545 to the total income, considering the cash deposits unexplained. The assessee claimed the deposits were from the realization of sundry debtors and sale proceeds of closing stock, supported by opening cash in hand. However, the AO and Ld. CIT(A) found the explanations inadequate, leading to the addition. The Tribunal intervened, directing the AO to grant the assessee a final opportunity to substantiate the source of the cash deposits, emphasizing the need for a factual and legal assessment.Issue 3: Charging interest under section 234A, 234B, and 234C of the ActThe appeal did not specifically address this issue in detail, and the judgment did not provide further insights into the arguments or decisions related to the interest charged under these sections. Therefore, the issue of charging interest remains unresolved in the judgment.In conclusion, the Tribunal allowed the appeal for statistical purposes, directing the AO to reevaluate the source of cash deposits. The judgment highlighted the importance of substantiating claims with evidence and ensuring a fair opportunity for the assessee to present their case. The decision underscored the need for a thorough examination of facts and adherence to legal principles in income tax assessments.