2025 (9) TMI 1305 - AT - Income Tax

Unexplained cash deposits partly allowed as business expenses; redeposits Rs.4,65,500 accepted, Rs.10,00,000 addition upheld; investment deletion on daughter's account proof

ITAT held that unexplained bank cash deposits were partly attributable to business expenses; redeposits were accepted to the extent of Rs.4,65,500, while ... Unexplained cash credit - HELD THAT:- From the copy of bank statement brought on record it is found that the substantial cash deposits were made on certain dates which cannot be transportation receipt considering the quantum of cash deposits on the other dates, which were only nominal. Further, the contention of the assessee that the entire cash withdrawal was redeposited in the bank account also cannot be accepted. The assessee must have incurred expenses for running the trucks towards fuel, spares, insurance, salaries & wages etc. Redeposit of cash in the bank account is accepted to the extent of Rs. 4,65,500/- and the addition for cash deposits in the bank account made by the AO is confirmed to the extent of Rs. 10,00,000/-. The ground taken by the assessee in this regard is partly allowed. Investment in bonds/debentures - Assessee had brought on record the bank statement of her daughter before the Ld. CIT(A), a copy of which has also been filed before us. It is found therefrom that the withdrawal of Rs. 10,00,000/- was made from her account on 12.10.2011 and that the assessee was also a nominee of the said account. Considering the evidence brought on record by the assessee, the addition of Rs. 10,00,000/- in respect of unexplained investment in bonds/debentures is deleted. The ground of the assessee is allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether cash deposits of Rs. 26,01,780/- in the assessee's bank account can be treated as unexplained cash credit under Section 69A read with Section 147 where the assessee later filed a return declaring presumptive income under Section 44AE and claimed the deposits arose from running trucks on hire. 2. Whether redeposited cash withdrawals can be set off against cash deposits for the purpose of explaining the source of cash deposits and avoiding addition under Section 69A (i.e., treatment of aggregate cash withdrawals of Rs.14,65,500/- as redeposits). 3. Whether an investment of Rs. 10,00,000/- in bonds/debentures made through the daughter's bank account can be treated as unexplained investment under Section 68 when the assessee produced the daughter's bank statement showing withdrawal and the assessee is nominee of that account. 4. Whether the return filed in response to notice under Section 148 declaring income under Section 44AE is an afterthought and therefore not to be accepted. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Treatability of cash deposits as unexplained income under Section 69A read with Section 147 Legal framework: Section 69A addresses unexplained cash credits/cash deposits; Section 147 permits reopening where income has escaped assessment. The AO completed assessment ex parte under Section 144 r.w.s. 147 after the assessee did not substantively respond in assessment proceedings. Presumptive scheme under Section 44AE governs income computation for owners of goods carriages. Precedent Treatment: The decision records no judicial precedent relied upon by the authorities or the Tribunal in resolving the factual sufficiency of explanation; the Tribunal applied established principles of evidence and consistency of disclosures across years rather than specific case law. Interpretation and reasoning: The Tribunal examined prior returns (noting transportation receipts of Rs.11,05,621/- in A.Y.2008-09 and consistent prior disclosures) and the bank statement showing large cash deposits on specific dates. The Tribunal accepted that some cash receipts could reasonably be attributed to transportation business and that prior pattern of receipts supported acceptance of part of the deposits (Rs.9,16,250/- accepted as transport receipts). However, given the quantum and timing of substantial cash deposits inconsistent with nominal receipts on other dates, and taking into account necessary business outgoings (fuel, spares, insurance, salaries), the Tribunal rejected the assessee's blanket contention that all deposits were genuine business receipts. The Tribunal accepted redeposits only to the extent of Rs.4,65,500/- (see Issue 2) and confirmed an addition of Rs.10,00,000/- as unexplained cash deposit under Section 69A in view of unexplained balance. Ratio vs. Obiter: Ratio - Where bank statements and plausible business receipts from prior years support part of cash deposits as business income, those deposits may be accepted; however, unexplained substantial cash deposits unsupported by credible accounting and inconsistent with expected cash outflows can be added under Section 69A. Obiter - Observations on the reasonableness of redeposited cash and business expenses are factual guidance rather than binding legal propositions. Conclusions: The Tribunal partly allowed the ground: it upheld an addition of Rs.10,00,000/- under Section 69A (confirmed) while accepting Rs.9,16,250/- as transportation receipts based on prior disclosures and facts. Issue 2 - Treatment of cash withdrawals as redeposits (set-off) for explaining bank cash deposits Legal framework: The AO may treat unexplained cash deposits as income unless adequately explained; claimed redeposits must be established by contemporaneous records and be consistent with business operations. Section 69A principles require that the assessee satisfactorily explain source of deposits. Precedent Treatment: No precedent was cited; the Tribunal applied fact-specific scrutiny of bank statements and business expenditure expectations. Interpretation and reasoning: The assessee asserted aggregate cash withdrawals of Rs.14,65,500/- were redeposited and therefore explained the deposits. The Tribunal found the contention not fully convincing because expenditure incidental to running trucks would normally consume a substantial portion of cash withdrawals (fuel, wages, spares, insurance). On factual review of the bank statement, the Tribunal accepted redeposits only to the extent of Rs.4,65,500/-, rejecting the balance claimed redeposits as not satisfactorily proven. The Tribunal balanced the asserted redeposits against realistic business expenditure and historical receipt patterns. Ratio vs. Obiter: Ratio - Claimed redeposits can be accepted only to the extent reliably established by bank records and consistent with the nature and expected outflows of the business; remaining unexplained deposits may be added under Section 69A. Obiter - Specific numeric apportionment (acceptance of Rs.4,65,500/-) is a fact-driven determination. Conclusions: The Tribunal allowed partial set-off of redeposited withdrawals (Rs.4,65,500/-) and confirmed addition of Rs.10,00,000/- of cash deposits as unexplained under Section 69A. Issue 3 - Treatment of investment of Rs.10,00,000/- in bonds/debentures under Section 68 when made through daughter's bank account Legal framework: Section 68 deals with unexplained credits (including investments) where the assessees must satisfactorily explain nature and source of money and prove genuineness of transactions; documentary proof like bank statements showing source of funds is relevant. Nomination of the assessee in another's account and the linkage between accounts can be relevant to explanation. Precedent Treatment: No judicial precedent was invoked; the Tribunal assessed admissibility of documentary evidence produced before the authorities. Interpretation and reasoning: The assessee produced the daughter's bank statement showing a withdrawal of Rs.10,00,000/- on 12.10.2011 and established that the investment in bonds/debentures was paid through the daughter's account. The assessee was shown to be a nominee of that account. On the basis of this documentary evidence, the Tribunal found that the source of funds for the investment was satisfactorily explained and that the AO/CIT(A) erred in treating the amount as unexplained investment under Section 68. Ratio vs. Obiter: Ratio - Where documentary evidence (bank statement of third party) establishes withdrawal and nexus to the investment and the assessee can show connection (e.g., nominee status), addition under Section 68 cannot be sustained. Obiter - Remarks concerning nominee status being a relevant factor are evidentiary guidance, not novel legal rule-making. Conclusions: The Tribunal deleted the addition of Rs.10,00,000/- under Section 68 relating to investment in bonds/debentures. Issue 4 - Whether return filed in response to notice under Section 148 is an afterthought Legal framework: Returns filed in response to reopening notice must be examined for credibility; a return per se is not invalid merely because filed after issue of notice, but may be treated as afterthought if not supported by credible evidence. Precedent Treatment: No authority cited; the Tribunal assessed the return's credibility against documentary evidence and consistency with past disclosures. Interpretation and reasoning: The Tribunal considered that the assessee had a history of declaring transport income in earlier years and that the return declared presumptive income under Section 44AE consistent with earlier pattern. The Tribunal accepted parts of the return (transport receipts supported by earlier returns and bank statement) while rejecting other assertions lacking corroboration (full redeposit claim). The Tribunal therefore did not treat the entire return as an afterthought but evaluated components of it on merits. Ratio vs. Obiter: Ratio - A return filed after notice cannot be summarily rejected as afterthought; components supported by independent evidence may be accepted while unsupported components may be disbelieved. Obiter - Observations about credibility of particular assertions are fact-specific. Conclusions: The Tribunal did not uphold a blanket finding of afterthought; it accepted the return to the extent supported by evidence (part of transport receipts) and rejected other parts; the ground that the return was wholly an afterthought was not sustained. Overall Disposition The appeal was partly allowed: the addition of Rs.10,00,000/- under Section 68 (unexplained investment) was deleted on production of the daughter's bank statement and nexus evidence; the addition under Section 69A for unexplained cash deposits was confirmed to the extent of Rs.10,00,000/- after allowing partial explanation of deposits (transport receipts and limited redeposits).