2022 (12) TMI 839 - AT - Income Tax

Unexplained cash credit u/s. 68 - cash deposits found in the bank account of the assessee - assessee could not submit any evidence in support of his claim that source for cash deposit is out of known source of income - HELD THAT - Although the assessee could not justify cash deposit in his bank account with valid evidence but in our considered view the CIT(A) should not have summarily rejected affidavit filed by nine persons who claimed to be closed relatives of the assessee. When the assessee has filed affidavit from certain persons it is the duty of the authorities below to verify the claim of the assessee and summon the persons from whom the assessee claims to have received cash. In this case CIT(A) summarily rejected affidavit filed by the assessee to justify source for cash deposit without carrying out further enquiries to ascertain the claim of the assessee in light of affidavit filed by various persons. Neither the assessee justified source for cash deposit with necessary evidence nor the CIT(A) reached a the conclusion that cash deposits with bank account is unexplained income of the assessee which can be assessed u/s. 68. Thus to settle dispute between the parties by restoring some sought of estimation of income towards cash deposits found in the bank account of the assessee. Therefore we deem it appropriate to direct the AO to estimate 20% profit on total cash deposits found in the bank account of the assessee. Hence we direct the AO to sustain 20% profit on total cash deposits and delete balance amount of addition made u/s. 68 of the Act. Appeal filed by the assessee is partly allowed.

Summary

Issues:
Assessment of unexplained cash credit under section 68 of the Income-tax Act, 1961 for assessment year 2004-05.

Analysis:
The appeal was filed against the order passed by the Commissioner of Income Tax (Appeals) regarding the assessment of Rs. 74,10,000 as unexplained cash credit under section 68 of the Income-tax Act for the assessment year 2004-05. The assessee raised various grounds of appeal challenging the assessment. In the original assessment, the Assessing Officer (AO) had added the amount towards unexplained cash credit found in the bank account of the assessee. The Tribunal had previously remanded the issue to the AO to verify the evidence provided by the assessee. In the subsequent round of litigation, the AO made the addition again, stating that the assessee failed to provide evidence supporting the source of the cash deposits. The assessee argued that the cash deposits were from money received from relatives against the sale of old jewelry. The Commissioner of Income Tax (Appeals) did not accept the explanation and dismissed the appeal. The Tribunal noted that while the assessee could not justify the cash deposits with valid evidence, the Commissioner should not have summarily rejected the affidavits filed by the close relatives of the assessee. The Tribunal directed the AO to estimate 20% profit on the total cash deposits found in the bank account and delete the balance amount of the addition made under section 68 of the Act. The appeal was partly allowed, settling the dispute by estimating income on the cash deposits.

In conclusion, the Tribunal found that while the assessee failed to provide sufficient evidence to justify the cash deposits, the Commissioner should have conducted further inquiries regarding the affidavits filed by the close relatives of the assessee. The Tribunal, to resolve the dispute, directed the AO to estimate 20% profit on the total cash deposits found in the bank account and delete the remaining addition made under section 68 of the Act.