2023 (2) TMI 561 - AT - Income Tax

Tribunal allows appeal, adds unexplained income, upholds CIT(A) decision

Shri Somusekhar Reddy Bapanapalli Versus The Income Tax Officer Ward - 6 (3 (4) Bangalore

The Tribunal condoned the delay in filing the appeal due to the unfamiliarity of the Chartered Accountant with Tribunal proceedings. Regarding the ... Unexpalined cash deposits - assessee has stated that the amounts of cash deposits include agricultural income, amount returned by brother, hand loan from father, re-deposit of earlier withdrawals and amounts withdrawn and re-deposited to maintain standard cash limit of the branch on Friday - HELD THAT:- Owning of agricultural land measuring 2 acres and 4 gundas is supported by RTC copy. Hence, earning of agricultural income cannot be doubted. However, the assessee’s source of total income as detailed above is only Rs,11,31,000/- other than from salary. Assessee being employed in bank earned returned income of Rs.2,77,000/- only. Considering these facts, source available to the assessee to deposit into the bank account to be considered around Rs.10,00,000/- out of Rs.11,31,000/- as explained above. The balance amount of Rs. 4,06,150/- to be considered as unexplained and to that extent addition to be sustained. Accordingly direct the AO to make an addition of Rs.4,06,150/- as unexplained income of the assessee. Ordered accordingly. Issues:1. Delay in filing appeal before the Tribunal.2. Addition of unexplained cash deposits in bank account.3. Justification for sustaining the addition by the CIT(A).4. Source of funds for cash deposits.5. Assessment of total income and unexplained income.Issue 1: Delay in filing appeal before the TribunalThe appeal was filed with a delay of 39 days. The assessee attributed the delay to the unfamiliarity of the Chartered Accountant with appeal proceedings before the Tribunal, leading to subsequent engagement of new counsel. The delay was explained as unintentional and beyond the assessee's control. The Department opposed condoning the delay, citing negligence on the part of the assessee. The Tribunal, considering the circumstances, condoned the delay, referring to the case law supporting such actions.Issue 2: Addition of unexplained cash deposits in bank accountThe AO added Rs. 14,06,150 as unexplained cash deposits in the bank account, which the CIT(A) partially sustained at Rs. 10,06,150. The assessee explained the sources of these deposits, including agricultural income, gifts from family members, and redeposits from earlier withdrawals. The AO rejected the explanations due to lack of documentary evidence. The Tribunal considered the explanations and directed the AO to add Rs. 4,06,150 as unexplained income, based on the available sources and the returned income of the assessee.Issue 3: Justification for sustaining the addition by the CIT(A)The CIT(A) provided relief of Rs. 4,00,000 out of the total addition, sustaining Rs. 10,06,150. The assessee contended that agricultural income, gifts, and redeposits explained the cash deposits. The Department argued against the availability of sufficient funds for the deposits. The Tribunal analyzed the sources of income and upheld the CIT(A)'s decision to sustain a portion of the addition based on the evidence presented.Issue 4: Source of funds for cash depositsThe assessee detailed the sources of funds for the cash deposits, including agricultural income, gifts, loans, and redeposits. The Department questioned the disclosure of agricultural income and the adequacy of funds for the deposits. The Tribunal considered the evidence provided, such as confirmations from parties and RTC copies, to determine the credibility of the sources. The Tribunal accepted certain sources but deemed a portion of the deposits unexplained.Issue 5: Assessment of total income and unexplained incomeAfter evaluating the sources of income and cash deposits, the Tribunal concluded that a portion of the deposits remained unexplained. The total income and available sources were assessed to determine the unexplained amount, leading to the direction for the AO to add Rs. 4,06,150 as unexplained income. The appeal was partly allowed based on this assessment.In conclusion, the Tribunal addressed the issues of delay in filing the appeal, the justification for sustaining the addition of unexplained cash deposits, the sources of funds for the deposits, and the assessment of total and unexplained income. The decision was made after a thorough analysis of the explanations provided by the assessee and the evidence presented, resulting in the partial allowance of the appeal.