2016 (6) TMI 1186 - AT - Income Tax

Unexplained cash found credited in the books of the assessee - Held that - Considering the totality of facts of the case and the surrounding circumstances we concur with the Ld. CIT(A) that the withdrawal were for the purpose of business and not available for redeposit.Moreover we also agree with the Ld. CIT(A) that in the absence of any detail of expenses incurred by the assessee in this period the cash flow statement has no relevance and the entire withdrawal cannot be said to have been redeposited.Moreover as held by the Ld. CIT(A) the withdrawals have been found to be subsequently redeposited after a gap of two or three months which is not probable. The assessee therefore we find has not been able to link the cash withdrawn from the bank with cash deposit we therefore uphold the order of the Ld. CIT(A) treating the cash deposit as unexplained income of the assessee. - Decided against assessee

Summary

Issues Involved:

1. Disallowance of Telephone and Car Expenses
2. Difference in Account of Shri Prabhat Chandra
3. Disallowance of ESI and PF
4. Addition on Account of Unexplained Deposit in Bank

Issue-wise Detailed Analysis:

1. Disallowance of Telephone and Car Expenses:
The initial assessment included a disallowance of Rs. 70,884/- for telephone and car expenses. The Ld. CIT(A) partly allowed the assessee’s appeal regarding this disallowance, reducing it to 10% of the expenses amounting to Rs. 35,442/-. The assessee contested this partial allowance, but the ground was not pressed during the appellate proceedings and was thus dismissed.

2. Difference in Account of Shri Prabhat Chandra:
The assessment included an addition of Rs. 5,000/- due to a discrepancy in the account of Shri Prabhat Chandra. The Ld. CIT(A) upheld this addition. The assessee also contested this, but this ground was not pressed during the appellate proceedings and was thus dismissed.

3. Disallowance of ESI and PF:
The assessment initially included a disallowance of Rs. 14,527/- for ESI and PF contributions. The Ld. CIT(A) deleted this addition, and this issue was not further contested in the appellate proceedings.

4. Addition on Account of Unexplained Deposit in Bank:
The most significant issue was the addition of Rs. 41,20,212/- for unexplained deposits in the bank accounts of the assessee. The Ld. CIT(A) accepted the explanation for Rs. 27 lakhs, attributing it to opening cash balance, advance from Sh. Mohinder Singh, and sale of plots. However, Rs. 14,20,212/- remained unexplained and was upheld as an addition.

During the appellate proceedings, the assessee argued that the unexplained deposits were from withdrawals made from the bank accounts. The Ld. CIT(A) rejected this explanation, noting the lack of a direct link between withdrawals and deposits and the significant gaps between the dates of withdrawals and deposits. The Tribunal found no infirmity in the Ld. CIT(A)'s order, agreeing that the withdrawals appeared to be for business purposes and not available for redeposit. The Tribunal upheld the addition of Rs. 14,20,212/- as unexplained income.

Appeal by the Revenue:
The Revenue filed an appeal contesting the deletion of Rs. 2 lakhs attributed to withdrawals in the financial year 2005-06 and Rs. 10 lakhs received as advance from Sh. Mohinder Singh. However, the tax effect of this appeal did not exceed the monetary limit of Rs. 10 lakhs as per Circular No. 21/2015, leading to the appeal being treated as withdrawn/not pressed.

Conclusion:
The appeal of the assessee was dismissed, and the addition of Rs. 14,20,212/- as unexplained income was upheld. The appeal of the Revenue was also dismissed as withdrawn/not pressed due to the tax effect being below the specified limit.