2025 (5) TMI 2247 - AT - Income Tax

Unexplained cash credit: inconsistent records and lack of corroboration sustain tax additions and restore cash-deficit addition.

Assessee's inconsistent contemporaneous records and late alteration of date-and-donor for a large cash receipt, coupled with absence of independent ... Unexplained cash credit u/s 68 - deficit/negative cash balance treated as income from unexplained sources - identity and credit worthiness of the donor and genuineness of the gift transaction not established - assessee in her computation of income (filed along with the return of income) had mentioned in “Schedule 3” that she had received an amount as gifts from others u/s 56((2)(vii)(a) Addition u/s 68 - HELD THAT: - The Tribunal held that the assessee's subsequent claim before the CIT(A) that the amount was a single gift from a named relative and was received on an earlier date was an afterthought contrary to the assessee's own original disclosures made in the computation and in correspondence with the AO. The AO's findings that the amount was shown in the books on 31.03.2014, that the assessee initially stated the sum was received from 'others' and offered to tax, and that supporting material (returns of the alleged donor and the firm) were not filed, justified treating the credit as unexplained. The Tribunal recorded that the CIT(A) erred in accepting the new self suited facts without adequate verification and therefore set aside the CIT(A)'s deletion and confirmed the addition under section 68. [Paras 17] Addition as unexplained cash credit under section 68 is confirmed. Deficit in cash book treated as income from unexplained sources - post facto alteration of facts and afterthought explanations - HELD THAT: - The Tribunal observed that the CIT(A) had vacated the cash deficit addition solely because he accepted the assessee's belated claim that the gift was received on 05.03.2014. Having set aside the CIT(A)'s acceptance of that claim and restored the finding that the credited gift was unexplained, the Tribunal held that the independent addition for the cash book deficit on 05.03.2014 revived. The AO's determination of a negative cash balance, unsupported by credible explanation, therefore properly stood as income from unexplained sources. [Paras 18] Addition on account of deficit/negative cash balance is restored. Final Conclusion: The Tribunal allowed the revenue appeal, set aside the CIT(A)'s acceptance of the assessee's after the fact explanation, confirmed the addition of Rs. 1.83 crores as unexplained cash credit under section 68, and restored the independent addition for the cash book deficit. Issues: (i) Whether the sum of Rs.1,83,00,000/- credited as cash gifts can be accepted as genuine and not liable to be treated as unexplained cash credit under Section 68 of the Income-tax Act, 1961; (ii) Whether the addition of Rs.1,82,34,150/- on account of deficit/negative cash balance in the assessee's cash book on 05.03.2014 is maintainable.Issue (i): Whether the claim of receipt of Rs.1,83,00,000/- as a gift exempt under Section 56(2)(vii)(a) is established and the addition under Section 68 is unjustified.Analysis: The assessee originally declared in her computation and a letter to the AO that Rs.1.83 crores was received on 31.03.2014 as gifts from others and offered to tax. Before the CIT(A) the assessee altered the case, claiming receipt from a named relative on 05.03.2014 and produced a declaration and capital account extracts for the alleged donor. The AO's remand enquiries showed that the donor and the firm had not filed returns for the relevant year and the capital account produced reflected inconsistencies including a negative post-withdrawal balance. The Tribunal emphasised that the pre-existing documentary position in the assessee's filed computation and earlier admission showing receipt on 31.03.2014, together with the late change in factual stance (preponing to 05.03.2014) and the absence of independent corroboration (no returns filed by donor/firm), constituted a material basis to treat the claimed gift as unestablished. The Tribunal treated the subsequent claim as an afterthought and held that the AO was justified in concluding the amount to be an unexplained cash credit under Section 68.Conclusion: The claim of Rs.1,83,00,000/- as a genuine gift exempt under Section 56(2)(vii)(a) is not established; the addition of Rs.1,83,00,000/- under Section 68 is confirmed in favour of the Revenue.Issue (ii): Whether the deletion by the CIT(A) of the addition of Rs.1,82,34,150/- made on account of deficit/negative cash balance in the cash book on 05.03.2014 was justified.Analysis: The CIT(A) deleted the cash-deficit addition on the basis that he accepted the assessee's revised claim of receipt of the cash gift on 05.03.2014, which would have provided the requisite cash in hand. Having set aside the CIT(A)'s acceptance of the revised gift claim (Issue (i)), the independent basis for the AO's finding of a negative cash balance on 05.03.2014 resurfaces. The Tribunal held that the cash-deficit addition is independent of the unexplained cash credit under Section 68 and is sustainable given the absence of credible evidence showing the availability of sufficient cash on the relevant date.Conclusion: The deletion of the addition of Rs.1,82,34,150/- is set aside and the addition is restored in favour of the Revenue.Final Conclusion: The appeal filed by the Revenue is allowed; the additions of Rs.1,83,00,000/- (unexplained cash credit under Section 68) and Rs.1,82,34,150/- (deficit/negative cash balance) are confirmed and restored respectively, resulting in an outcome favourable to the Revenue.Ratio Decidendi: Where an assessee's own filed records and earlier admissions establish a receipt date and characterization inconsistent with a later revised claim made before appellate authority, and where independent corroboration for the revised claim is absent or unreliable (including non-filing of returns by the alleged donor/firm), the assessing authority's finding of unexplained cash credit under Section 68 and related cash-deficit additions may be upheld.