Addition for cash deposits as unexplained money u/s 69A deleted based on unchallenged spouse income affidavit

ITAT Delhi-AT allowed the assessee's appeal and deleted the addition made as unexplained money u/s 69A. The Tribunal held that cash deposits in the joint bank account could not be treated as unexplained in the assessee's hands where the assessee's spouse, who conducted vocational classical singing classes at home, affirmed on affidavit that the deposits were from her own income. As the affidavit remained uncontroverted by the AO and no contrary material was produced, its contents had to be accepted as true, following SC principles on unchallenged affidavits. Consequently, the addition u/s 69A was unsustainable.

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1. ISSUES PRESENTED AND CONSIDERED

- Whether cash deposits of ?8,79,000 in a joint bank account with the assessee's wife could be treated as unexplained money/cash credit in the hands of the assessee under the Act.

- What is the evidentiary value of an uncontroverted affidavit explaining the source of such cash deposits in income-tax proceedings.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Taxability of cash deposits in joint bank account as unexplained money/cash credit in hands of assessee

Interpretation and reasoning

- The assessee, a medical professional, had not filed a return originally but later suo motu filed a belated manual return declaring income of ?43,30,370 and paid due taxes. Based on this self-declaration, reassessment proceedings were initiated under section 148 and the same income was again returned.

- The reassessment revealed cash deposits of ?8,79,000 in a joint bank account held with the assessee's wife. The assessee explained that these deposits were made by his wife out of her income from classical singing/vocational classes, and furnished her sworn affidavit affirming that the cash belonged to her and was deposited by her.

- The Court noted that, since the assessee himself had voluntarily disclosed his taxable income and paid taxes, it was not rational to assume that, had these deposits been his own income, he would have omitted them from his declared income. This conduct supported the explanation that the deposits did not belong to the assessee.

- It was found as a fact that the wife was running classical singing/vocational classes at home at a low level, and it was plausible that she did not maintain detailed records of students or receipts on a day-to-day basis.

- The wife's affidavit clearly accepted ownership and deposit of the cash as arising from her own income. The Assessing Officer neither cross-examined her nor brought any contrary material on record to discredit the contents of the affidavit.

- The Court observed that, in absence of any rebuttal or adverse material, the explanation that the deposits belonged to the wife and arose from her own activities could not be rejected merely for want of formal supporting documents or because the joint bank account was not reflected in the assessee's books.

- The Commissioner (Appeals) had treated the deposits as unexplained money under section 69A, whereas the Assessing Officer had made the addition under section 68. The Court held, on the merits of the explanation, that no addition could be sustained in the assessee's hands as unexplained money, irrespective of the provision invoked.

Conclusions

- The cash deposits in the joint bank account were satisfactorily explained as belonging to and arising from the income of the assessee's wife.

- No addition could be made in the hands of the assessee in respect of these deposits as unexplained money under section 69A (or as unexplained cash credit under section 68).

- The Assessing Officer was directed to delete the addition of ?8,79,000.

Issue 2: Evidentiary value of uncontroverted affidavit explaining source of cash deposits

Legal framework

- The Court referred to the principle laid down by the Supreme Court in Mehta Parikh & Co. v. CIT that an affidavit which remains uncontroverted cannot be arbitrarily ignored and its contents must be treated as true and correct unless rebutted by evidence or cross-examination.

Interpretation and reasoning

- The assessee's wife submitted a sworn affidavit stating that the cash deposits in the joint bank account were made by her out of her own income from coaching/classical singing classes.

- The Assessing Officer did not summon or cross-examine her and did not produce any material to show that the contents of the affidavit were false or unreliable.

- Applying the above Supreme Court principle, the Court held that the uncontroverted affidavit could not be brushed aside and its contents had to be accepted as correct in the absence of any rebuttal.

Conclusions

- The uncontroverted affidavit of the assessee's wife regarding ownership and source of the cash deposits was required to be accepted as truthful.

- Such affidavit, not having been challenged by cross-examination or contrary evidence, constituted sufficient explanation to negate an addition in the assessee's hands on account of unexplained money/cash credit.

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