2023 (8) TMI 220 - AT - Income Tax

Appeal partially allowed, assessment increase restricted. Lack of evidence led to denial, but delay condoned.

Mamta Rani Versus Income-tax Officer, Ward-3 (30 (2), Saharanpur

The Tribunal partially allowed the appeal, restricting the addition made by the Assessing Officer under section 144/147 to 20% of the originally assessed ... Addition of cash deposits in bank account u/s 69A - HELD THAT:- Assessee has filed copy of bank statement of the bank account on the basis of which the impugned addition has been made. From the bank account statement it is transpired that the assessee had deposited in cash and there were withdrawals out of the cash deposits. There were substantial withdrawals and deposits, the lower authorities have not given set off of the cash withdrawals made by the assessee at different intervals, find that there were cash withdrawals as well before making deposits. Therefore, it can be assumed that the deposits were also from the withdrawals made by the assessee on earlier occasions. Hence, it would be fair and reasonable to restrict the addition made by the authorities below to the extent of 20%. Decided partly in favour of assessee. ISSUES PRESENTED AND CONSIDERED 1. Whether additions under section 69A (unexplained cash credits/deposits) can be sustained where cash deposits appear in bank account and the assessee fails to furnish evidence of source? 2. Whether the onus lies on the assessee to prove the source of cash deposits for purposes of section 69A and whether non-attendance/non-production of evidence at assessment/appellate proceedings justifies sustaining additions? 3. Whether, in assessing unexplained cash deposits, set-off of prior cash withdrawals from the same bank account must be given and, if so, to what extent an assessing/additional assessment may be restricted as a matter of judicial discretion to meet the interests of justice? 4. Whether the assessing authority's invocation of revision/reassessment jurisdiction under section 144 read with section 147 (reopening) was vitiated for being founded on mere suspicion rather than reasons to believe; and whether lack of opportunity of being heard invalidates the additions. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Sustenance of additions under section 69A where cash deposits appear in bank account and no source is furnished Legal framework: Section 69A permits addition to income where unexplained cash credits/deposits are found and the assessee fails to satisfactorily account for their nature and source. The assessment process requires the assessee to explain/establish source when presented with banking deposit information (e.g., AIR). Precedent treatment: No specific precedent was relied upon or considered in the record before The Tribunal. Interpretation and reasoning: The Tribunal accepted that cash deposits recorded in the bank account form a basis for treating amounts as unexplained cash credits under section 69A when the assessee does not produce satisfactory evidence. The lower authorities' finding that the assessee did not discharge the onus to explain deposits was taken as a permissible basis for addition. The Tribunal, however, examined the bank statement and transactional pattern before confirming/additionally modifying the quantitative impact of the addition. Ratio vs. Obiter: Ratio - unexplained cash deposits reflected in bank records may be subjected to addition under section 69A where the assessee fails to prove source. Conclusion: Additions under section 69A are supportable on record where deposits are unexplained and the assessee fails to produce evidence; the Tribunal upheld the principle that the onus to prove source lies with the assessee (see Issue 2 for onus discussion). Issue 2 - Onus of proof and consequences of non-attendance/non-production of evidence Legal framework: Tax law places the evidentiary burden on the assessee to explain and prove the source of unexplained deposits once the tax authorities bring such transactions on record. Precedent treatment: The record contains no citation of precedent overturning this general evidentiary principle; the authorities below applied this principle in sustaining additions. Interpretation and reasoning: The Tribunal noted repeated non-attendance by the assessee before authorities and during appellate adjudication, and absence of documentary proof except the bank statement. The Tribunal therefore accepted the Assessing Officer's and Commissioner (Appeals)'s conclusion that the onus was not discharged. The Tribunal nonetheless inspected the bank statement to determine whether equitable relief by set-off was warranted. Ratio vs. Obiter: Ratio - failure to produce evidence or to attend proceedings may justify sustaining additions where the onus to explain remains unfulfilled. Conclusion: The assessee's failure to furnish corroborative evidence and to attend proceedings sustained the legal onus position and justified additions, subject to the limited equitable adjustment addressed under Issue 3. Issue 3 - Set-off of prior cash withdrawals against subsequent cash deposits; judicial discretion to restrict additions Legal framework: While section 69A allows addition of unexplained cash deposits, assessment must take account of contemporaneous and related facts shown on record, including patterns of withdrawals and deposits in the same account; tribunals exercise discretion to do substantial justice by adjusting additions where record supports offsetting transactions. Precedent treatment: The judgment does not cite authorities but applies a fact-sensitive equitable approach to quantify the addition. Interpretation and reasoning: The Tribunal inspected the bank account statement and observed both substantial cash withdrawals and deposits occurring at different intervals. On this factual matrix the Tribunal reasoned that some deposits could have originated from earlier withdrawals made by the assessee. To subserve substantial justice, the Tribunal exercised judicial discretion to mitigate the full addition: rather than sustaining the entire addition made by lower authorities, it restricted the addition to 20% of the impugned amount, thereby granting the assessee part relief. Ratio vs. Obiter: Ratio - where bank statements show substantial withdrawals contemporaneous or prior to deposits, a tribunal may, in exercise of judicial discretion and to do substantial justice, allow partial set-off or limit the quantum of addition; such factual adjustment is permissible even where the assessee has not fully discharged the onus, provided the record supports a reasonable inference that some deposits derived from prior withdrawals. Conclusion: The Tribunal concluded that, on the facts, equitable restriction of the addition to 20% was fair and reasonable; the appeal was therefore partly allowed and the quantum of addition was reduced accordingly. Issue 4 - Validity of assumption of jurisdiction under section 144 r.w.s. 147 and adequacy of reasons (reasons to believe v. reasons to suspect) and opportunity to be heard Legal framework: Reopening of assessment under section 147 and exercise of jurisdiction under section 144 require recorded 'reasons to believe' and compliance with procedural safeguards, including opportunity to be heard; mere suspicion is inadequate to sustain reopening. Precedent treatment: The record reflects the assessee's contention that reasons were only 'reasons to suspect', but no precedent was examined by The Tribunal to determine the sufficiency of reasons formally. Interpretation and reasoning: Although the assessee challenged jurisdictional and procedural aspects (alleging reasons amounted to suspicion and denial of real opportunity of being heard), The Tribunal did not set aside the proceedings on jurisdictional grounds. Instead The Tribunal proceeded to consider the merits of the addition, noting repeated non-attendance and absence of evidence by the assessee. The Tribunal therefore implicitly treated jurisdictional objections as not established on the facts or not decisive in light of the assessee's failure to participate and produce evidence. Ratio vs. Obiter: Obiter - while the assessee raised substantive jurisdictional and procedural objections (reasons to believe v. reasons to suspect; denial of opportunity), The Tribunal's decision to proceed on merits and to adjudicate quantum implies those objections were not determinative on the facts; the decision does not lay down a new rule on sufficiency of reopening reasons. Conclusion: The Tribunal did not quash the reopening or the reliance on section 69A on jurisdictional grounds; lack of attendance and failure to produce evidence led The Tribunal to address the merits and to grant only partial relief by way of reduction in quantum rather than invalidating the proceedings for want of reasons or lack of hearing.