2024 (12) TMI 1544 - AT - Income Tax

Undisclosed income u/s 69A - credits in the bank accounts were not satisfactorily explained - primary reason why CIT(Appeals) confirmed the additions was on the foundation that cash withdrawn in the previous several years could not have been kept unused for such a long period of time HELD THAT - The assessee clarified that the amount deposited into the bank account represented the repayment of previous loans given to relatives which were returned to the assessee during demonetization period. A detailed tabular chart giving details of relatives from whom cash was received was also furnished before Ld. CIT(Appeals) during the course of appellate proceedings. In the case of Ajit Bapu Satam 2022 (9) TMI 103 - ITAT MUMBAI ITAT held that where Assessee contended that cash which was withdrawn by assessee from bank was deposited in very same bank account and he provided details of cash withdrawal from bank account and cash so withdrawn was lying with him and was not used anywhere else since both cash withdrawal and deposit were duly substantiated from bank statement of very same branch of bank and there was no findings by lower authorities that cash available with assessee was invested or utilised for any other purpose cash so deposited could not be treated as unexplained money under section 69A. In the case of Smt. Krishna Agarwal 2021 (9) TMI 625 - ITAT JODHPUR held that mere time gap between withdrawals and deposits cannot be the reason for alleging undisclosed income. In the case of ITO v. Deepali Sehgal 2014 (9) TMI 1073 - ITAT DELHI it was held that merely because there was a time gap between withdrawal of cash and its further deposit to the bank account the amount can not be treated as income from undisclosed sources u/s 69 of the Act in the hands of the assessee. Accordingly looking into the instant facts and the explanation provided by the assessee along-with supporting evidences/ Affivavits etc. we are of the considered view that no addition is called for the instant facts. Decided in favour of assessee.

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

Whether the addition of Rs. 15,15,000 as unexplained money under Section 69A of the Income-tax Act, 1961, was justified.
The legality and validity of reopening the assessment under Section 147 of the Income-tax Act.
Whether the principles of natural justice were violated by not allowing the appellant to produce additional evidence during the appeal process.

ISSUE-WISE DETAILED ANALYSIS

1. Addition of Rs. 15,15,000 as Unexplained Money under Section 69A

Relevant Legal Framework and Precedents: Section 69A of the Income-tax Act pertains to unexplained money, where if an assessee is found to be the owner of any money and cannot provide satisfactory explanation about its nature and source, it may be deemed as income. The Tribunal referred to precedents such as Sudhirbhai Pravinkant Thaker, Ajit Bapu Satam, and Jaspal Singh Sehgal, which emphasize that mere time gaps between cash withdrawals and deposits do not justify treating them as unexplained income if substantiated by evidence.
Court's Interpretation and Reasoning: The Tribunal noted that the assessee provided substantial evidence and explanations regarding the source of the cash deposits, claiming they were repayments of loans given to relatives. The Tribunal found that the Department did not conduct any inquiry with the lenders to verify the assessee's claims nor pointed out specific defects in the evidence submitted.
Key Evidence and Findings: The assessee submitted notarized declarations from relatives, a detailed tabular chart of cash received, and PAN numbers of the relatives. The Tribunal found these submissions substantial and plausible.
Application of Law to Facts: The Tribunal applied the principles from cited precedents to the facts, determining that the Department's failure to disprove the assessee's claims or find alternative uses for the withdrawn cash weakened the case for treating the amount as unexplained income.
Treatment of Competing Arguments: The Tribunal considered the Department's argument that the cash could not have been held unused for a long period but found the assessee's explanations and evidence more convincing.
Conclusions: The Tribunal concluded that the addition of Rs. 15,15,000 as unexplained money under Section 69A was not warranted.

2. Reopening of Assessment under Section 147

Relevant Legal Framework: Section 147 pertains to the reopening of assessments if the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment.
Court's Interpretation and Reasoning: The Tribunal did not explicitly address the legality of the reopening in detail, focusing instead on the substantive issue of unexplained money.
Conclusions: The Tribunal implicitly found the reopening to be procedurally acceptable, as it focused on the substantive issues of the case.

3. Principles of Natural Justice and Additional Evidence

Relevant Legal Framework: Principles of natural justice require that parties have the opportunity to present their case and respond to evidence against them.
Court's Interpretation and Reasoning: The Tribunal noted that the assessee was allowed to submit additional evidence during the appellate proceedings, which was considered by the CIT(Appeals) and the Assessing Officer.
Conclusions: The Tribunal found no violation of natural justice principles, as the assessee was granted the opportunity to present additional evidence.

SIGNIFICANT HOLDINGS

Verbatim Quotes of Crucial Legal Reasoning: The Tribunal emphasized, "mere time gap between withdrawals and deposits cannot be the reason for alleging undisclosed income."
Core Principles Established: The judgment reinforced the principle that unexplained income additions require substantive evidence and inquiry by the Department, and mere time gaps between transactions do not suffice as grounds for such additions.
Final Determinations on Each Issue: The Tribunal allowed the appeal, concluding that the addition of Rs. 15,15,000 as unexplained money was not justified and upheld the procedural validity of the assessment reopening.