Tribunal allows appeal on cash credit assessment, directs 20% profit estimation.

The Tribunal partially allowed the appeal concerning the assessment of unexplained cash credit under section 68 of the Income-tax Act for the assessment year 2004-05. While the assessee could not sufficiently prove the source of cash deposits, the Tribunal criticized the Commissioner for summarily rejecting affidavits from close relatives. The Tribunal directed the Assessing Officer to estimate 20% profit on the total cash deposits and delete the remaining addition made under section 68 of the Act, settling the dispute.

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Issues:
Assessment of unexplained cash credit under section 68 of the Income-tax Act, 1961 for assessment year 2004-05.

Analysis:
The appeal was filed against the order passed by the Commissioner of Income Tax (Appeals) regarding the assessment of Rs. 74,10,000 as unexplained cash credit under section 68 of the Income-tax Act for the assessment year 2004-05. The assessee raised various grounds of appeal challenging the assessment. In the original assessment, the Assessing Officer (AO) had added the amount towards unexplained cash credit found in the bank account of the assessee. The Tribunal had previously remanded the issue to the AO to verify the evidence provided by the assessee. In the subsequent round of litigation, the AO made the addition again, stating that the assessee failed to provide evidence supporting the source of the cash deposits. The assessee argued that the cash deposits were from money received from relatives against the sale of old jewelry. The Commissioner of Income Tax (Appeals) did not accept the explanation and dismissed the appeal. The Tribunal noted that while the assessee could not justify the cash deposits with valid evidence, the Commissioner should not have summarily rejected the affidavits filed by the close relatives of the assessee. The Tribunal directed the AO to estimate 20% profit on the total cash deposits found in the bank account and delete the balance amount of the addition made under section 68 of the Act. The appeal was partly allowed, settling the dispute by estimating income on the cash deposits.

In conclusion, the Tribunal found that while the assessee failed to provide sufficient evidence to justify the cash deposits, the Commissioner should have conducted further inquiries regarding the affidavits filed by the close relatives of the assessee. The Tribunal, to resolve the dispute, directed the AO to estimate 20% profit on the total cash deposits found in the bank account and delete the remaining addition made under section 68 of the Act.

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