2021 (3) TMI 7 - AT - Income Tax

Tribunal overturns decision, finds bank deposits explained as gifts, criticizes lack of evidence

Shri Girijamma Krishnappa Praveen Versus Income Tax Officer, Ward 6 (3) (1), Bangalore

The Tribunal allowed the appeal, overturning the CIT(A)'s decision to treat bank deposits as unexplained cash deposits. The Tribunal criticized the CIT(A) ... Unexplained cash deposits u/s. 68 - HELD THAT:- As assessee received a sum from the three parties and this amount has been deposited into Bank account of the assessee with Punjab National Bank. Being so, to that extent it cannot be considered as unexplained deposit by the lower authorities. The assessee has discharged its burden in explaining the source of the deposit into assessee's Bank account. Hence, to this extent of this sum, the credit to be given by the Assessing Officer. Source of deposit of Cash from earlier withdrawal and receipt of gift from the relatives - Held that:- As gone through withdrawals and deposits into Bank Account with Punjab National Bank on various dates. As seen from the bank account, there is repeated withdrawals and deposit into same bank account - There is no presumption that the assessee expended this amount for any other purpose and the lower authorities are not justified in deciding that the assessee has spent the earlier withdrawals for some purpose instead of depositing into same bank account without any material in the hands of authorities. Accordingly, the earlier withdrawals are available to the assessee to redeposit into the said bank account. Further, the assessee explained that there was gift from mother, the assessee has filed confirmation letter from mother before CIT (Appeals), disbelieved it since the credit worthiness of donor was not proved. In our opinion, once the confirmation letter was filed by the assessee from Donor, the burden cast upon assessee is discharged and it would shift to revenue authorities. The Revenue authorities cannot make addition without making any further enquiry. Therefore in these circumstances, the lower authorities are not justified in making addition toward unexplained deposits into bank account. Being so, we have no hesitation in deleting the addition sustained by the CIT (Appeals) on this issue and the ground of appeal of the assessee is allowed. Issues Involved:1. Whether the CIT(A) erred in treating bank deposits as unexplained cash deposits.2. Whether the CIT(A) erred in refusing to admit additional evidence (lease deeds).3. Whether the CIT(A) erred in assessing the cash flow statement's reliability.4. Whether the CIT(A) erred in holding that certain cash deposits were not supported by evidence.5. Whether the CIT(A) erred in rejecting the explanation for cash deposits as gifts from the assessee's mother.Detailed Analysis:Issue 1: Treatment of Bank Deposits as Unexplained Cash DepositsThe assessee filed a return for AY 2015-16, declaring an income of Rs. 3,01,000 under section 44AD. The Assessing Officer (AO) issued notices under sections 143(2) and 142(1), and the assessee explained that the deposit of Rs. 1,47,13,060 was from the sale of ancestral property. The AO, however, found discrepancies and treated the entire cash deposit of Rs. 1,56,00,060 as unexplained cash credit under section 68. The CIT(A) upheld this view, noting that the assessee failed to link the cash deposits with earlier withdrawals and did not provide a reliable cash flow statement.Issue 2: Admission of Additional Evidence (Lease Deeds)The assessee claimed that part of the deposits came from lease advances totaling Rs. 63,00,000. The CIT(A) refused to admit lease deeds as additional evidence under Rule 46A, stating that the assessee did not provide a bona fide explanation for not producing these documents earlier. The Tribunal found that the CIT(A) should have admitted these documents for adjudication, as they were crucial for explaining the source of deposits.Issue 3: Reliability of Cash Flow StatementThe CIT(A) rejected the cash flow statement provided by the assessee, noting that it was produced for the first time during appellate proceedings and showed discrepancies. The Tribunal observed that the CIT(A) should have verified the cash book and lease deeds for their genuineness instead of outright rejecting them.Issue 4: Evidence for Certain Cash DepositsThe CIT(A) held that the assessee did not provide sufficient evidence for cash deposits of Rs. 8,87,000 in the National Co-operative Bank, which were claimed to be gifts from the assessee's mother. The Tribunal noted that once the assessee provided a confirmation letter from the mother, the burden shifted to the revenue authorities to disprove it. The Tribunal found that the lower authorities did not conduct further inquiries to disprove the assessee's claim.Issue 5: Explanation for Cash Deposits as GiftsThe CIT(A) dismissed the explanation that the cash deposits were gifts from the assessee's mother due to a lack of evidence of the donor's creditworthiness. The Tribunal held that the confirmation letter from the mother was sufficient to discharge the assessee's burden, and the revenue authorities failed to conduct further inquiries.Conclusion:The Tribunal allowed the appeal, noting that the CIT(A) should have admitted the additional evidence and verified the cash flow statement and lease deeds. The Tribunal also found that the assessee had sufficiently explained the source of the deposits and that the revenue authorities failed to disprove the assessee's claims regarding gifts from the mother. The appeal was allowed, and the additions made by the CIT(A) were deleted.