Unexplained cash deposits subjected to treasury verification; remand to assessing officer to reassess and accept if verified

Unexplained cash deposits were examined on the premise that the taxpayer claimed they derived from contract receipts paid in cash to the treasury. The assessing officer is directed to verify, by exercising statutory powers, whether the claimed contract receipts were in fact received in cash from the treasury; this verification will determine whether the cash deposits are explained. If verification establishes receipt of contract payments in cash from the treasury, the cash deposits must be treated as explained and no addition is warranted; otherwise the deposits remain unexplained for assessment purposes.

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Issues: Whether the cash deposits in the assessee's bank account are explained as contract receipts received in cash from the treasury and whether the matter should be remitted to the Assessing Officer for verification.

Analysis: The assessee claimed that cash deposits represented contract receipts paid in cash by the government treasury but did not produce documentary evidence of receipt. The Assessing Officer made additions treating the deposits as unexplained. The appellate authority recorded service-related delay which was condoned and admitted the appeal. The Tribunal observed that the Assessing Officer has statutory powers under the Income-tax Act to verify receipts with the treasury and to call for evidence; as the primary evidence was not before the file, remand to the Assessing Officer for verification and de novo consideration was appropriate. The revenue did not oppose remand.

Conclusion: The matter is remitted to the file of the Assessing Officer to verify whether the contract receipts were received in cash from the treasury; if verification establishes that the receipts were so received, the cash deposits shall be treated as explained and no addition shall be made. The appeal is thus partly allowed in favour of the assessee.

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