2022 (5) TMI 1229 - AT - Income Tax

Tribunal overturns tax addition, finds assessee's explanations credible

The Tribunal allowed the appeal, overturning the First Appellate Authority's decision and deleting the Rs.12,70,100 addition under Section 69A of the ... Addition u/s 69A - unexplained investment in the bank account - best judgment assessment order u/s 144 - Scope of expression “may” used in Section 69A - whether the assessee has explained the source of such deposit with the help of reliable piece of evidence? - HELD THAT:- Assessee belongs to a non-organized sector of the society. The ld. Sr. D/R is expecting the maintenance of accounts and other details in a meticulous manner as are being maintained by the big business houses, but here it has to be appreciated that the assessee is running a small shop in a rural area. He has explained the source as contribution from his father and brother towards the marriage of his daughter as well as for purchase of some items for the shop. A sum of Rs.6,01,600/- was deposited in the bank account of the assessee on 21/12/2016 and a RTGS was issued on 22/12/2016. It was transferred in the account of M/s. Triven Tracom Pvt. Ltd. According to the assessee, it was given for the purpose of purchasing sugar for trading. If we appreciate the explanation of the assessee by looking at his bank account, then, we find force in his submissions. In day to day behavior, nobody kept the details in a meticulous manner, more particularly the section of the society which is struggling for survival. We could have appreciated the case of the revenue authorities if they were able to lay their hands on other assets of the assessee in shape of house property, land etc. or on details of any unexplained expenditure. Quantum in question is concerned, to this extent, there can be a saving from the father and brother who would have contributed to the assessee towards the marriage of his daughter. The might have saved this money for that purpose and because of demonetization, it was deposited in the bank account. Similarly, the assessee has demonstrated that a sum of Rs.6,10,600/- out of the total deposit was used for the purpose of his business. Though there is no specific evidence but the circumstances of the assessee and his lifestyle do suggest that the expression “may” used in Section 69A of the Act, has to be used here. This expression “may” infused discretion in the Assessing Officer to treat such an investment as explained or unexplained investment - Assessee appeal allowed. Issues:1. Addition of Rs.12,70,100 under Section 69A of the Income Tax Act, 1961.2. Failure to submit requisite details and participate in proceedings before the First Appellate Authority.3. Dismissal of appeal by the First Appellate Authority.4. Explanation provided by the assessee regarding the source of deposits.5. Consideration of evidence and arguments by the Tribunal.6. Decision on whether the addition should be deleted or upheld.Analysis:1. The appeal was filed against the addition of Rs.12,70,100 under Section 69A of the Income Tax Act, 1961. The Assessing Officer made this addition as unexplained investment in the bank account of the assessee. The First Appellate Authority confirmed this addition, leading to the appeal before the Tribunal.2. The assessee failed to submit requisite details and participate in the proceedings before the First Appellate Authority. Consequently, the appeal was dismissed for lack of cooperation from the assessee.3. The Tribunal considered the explanation provided by the assessee regarding the source of the deposits. The assessee claimed that the amounts were received from family members for specific purposes, supported by affidavits and bank statements.4. The Tribunal noted that the assessee operated a small shop in a rural area and did not maintain detailed accounts like larger businesses. The Tribunal acknowledged the difficulties faced by the assessee in providing documentation due to limited technological access.5. After hearing both parties, the Tribunal analyzed the provisions of Section 69A of the Act, which deal with unexplained investments. The Tribunal observed that the assessee's explanation, supported by the evidence presented, was plausible in the given circumstances.6. Considering the background and lifestyle of the assessee, the Tribunal exercised discretion and decided that the addition of Rs.12,70,100 should be deleted. The Tribunal found merit in the explanations provided by the assessee regarding the source and utilization of the deposited funds, concluding that the deposit should not be treated as unexplained investment.7. As a result, the Tribunal allowed the appeal of the assessee, overturning the decision of the First Appellate Authority and deleting the addition of Rs.12,70,100 under Section 69A of the Income Tax Act, 1961.This detailed analysis of the judgment highlights the key issues involved, the arguments presented by both parties, and the Tribunal's decision based on the evidence and legal provisions.