2025 (5) TMI 1233 - AT - Income Tax

Unexplained cash deposits in the bank account - Receipts from his brothers on the occasion of his daughter s marriage - HELD THAT - As observed that both the brothers have filed affidavit for the above gifts made by them. They have filed affidavits along with their respective PAN. As observed that tax authorities have rejected the affidavits for the reason that the brothers do not have any creditworthiness. As these deposits have made by the assessee during the marriage of his daughter it is normal in the families to gather funds for the marriage and the brothers have filed affidavit confirming giving of gifts for the purpose of marriage. Therefore in my considered view tax authorities have rejected the abovesaid affidavits on gross basis. Thus cash deposit to the extent of Rs. 9, 00, 000/- may be accepted. Further deposit of cash deposit as observed that assessee has submitted a combined statement as per which assessee has withdrawn the cash from his own bank account and re-deposited the same within the gap of three months.observation of the AO is also contrary to the bank statement submitted by the assessee. For the sake of justice we are inclined to remit this issue for verification of cash withdrawal and redeposit to the file of AO. We direct the AO to verify the cash withdrawal and redeposit of Rs. 17, 00, 000/- during various dates as per the statements submitted by the assessee after giving proper opportunity of being heard to the assessee. Accordingly the grounds taken by the assessee are partly allowed.

Summary

The core legal questions considered in this appeal include: (1) Whether the delay in filing the appeal before the Tribunal should be condoned; (2) Whether the reopening of the assessment under section 147 of the Income-tax Act, 1961 was justified and valid; (3) Whether the addition of Rs. 26,00,000/- to the assessee's income on account of unexplained cash deposits in the bank account was justified; (4) Whether the evidentiary standard applied by the Assessing Officer (AO) and the Commissioner of Income-tax (Appeals) [CIT(A)] in rejecting the assessee's explanation and affidavits was appropriate; and (5) Whether the AO's exercise of powers under section 133(6) and the framing of the assessment order were lawful and consistent with principles of natural justice.

Regarding the condonation of delay, the Tribunal considered the assessee's medical condition, specifically a serious heart ailment and heart attack, supported by medical certificates and affidavit. The Tribunal held that the delay was caused by a reasonable and sufficient cause, thus condoning the delay in filing the appeal despite it being time barred by 335 days. This establishes that health-related reasons, supported by credible evidence, can constitute reasonable cause for condonation of delay in tax appeals.

On the reopening of assessment under section 147, the facts reveal that the AO initiated proceedings after recording reasons and obtaining prior approval from the Principal Commissioner of Income-tax (PCIT), Gurgaon. Notices under sections 142(1), 143(2), and 148 were duly issued and served. The reopening was premised on unexplained cash deposits amounting to Rs. 26,00,000/- in the assessee's bank account. The reopening procedure appears to have been followed as per statutory requirements, and no jurisdictional objection was adjudicated, as the Tribunal dealt with the matter on merit.

The principal issue pertains to the addition of Rs. 26,00,000/- on account of cash deposits. The AO observed that the assessee deposited Rs. 26,00,000/- in his ICICI Bank account during the relevant period. The assessee explained that Rs. 9,00,000/- was received as gifts from his brothers on the occasion of his daughter's marriage, supported by affidavits from the donors, PAN details, and a jamabandi copy. The remaining Rs. 17,00,000/- was claimed to be cash withdrawn from the same bank account and redeposited. The AO rejected the affidavits and the jamabandi as insufficient evidence, noting the absence of corroborative documents such as the donors' Income Tax Returns (ITRs), computation of income, and bank statements. The AO further rejected the explanation regarding cash withdrawals and redeposits, considering the withdrawals to be small and insufficient to justify the cash deposits. Consequently, the AO made the addition of Rs. 26,00,000/- as unexplained income.

The CIT(A) upheld the AO's addition, emphasizing that mere filing of affidavits does not suffice to discharge the evidentiary burden. The CIT(A) held that identity alone is insufficient; the genuineness and creditworthiness of the donors must also be established to prove that the receipts are not income. The CIT(A) found the evidence produced by the assessee inadequate to establish the source of cash deposits.

In appeal before the Tribunal, the assessee contended that the Rs. 9,00,000/- received from his brothers was genuine gifts for the daughter's marriage, supported by affidavits and PAN details. Regarding the Rs. 17,00,000/- cash deposits, the assessee submitted a detailed cash flow statement showing cash withdrawals and redeposits within a three-month period and bank statements corroborating these transactions. The assessee argued that the AO ignored the substantial cash withdrawals and hastily made additions without proper application of mind or affording adequate opportunity to explain.

The Revenue's representative contended that the assessee failed to produce corroborative evidence and suggested that if the Tribunal found it necessary, the matter could be remitted to the AO for further verification.

The Tribunal analyzed the evidence and submissions. It accepted that the Rs. 9,00,000/- cash gifts from the brothers were genuine, noting that it is customary in families to gather funds for marriage occasions. The Tribunal observed that the affidavits filed by the brothers, along with their PAN details, were rejected by tax authorities on a gross basis without adequate consideration of the familial context or creditworthiness. Consequently, the Tribunal allowed the assessee's claim to the extent of Rs. 9,00,000/- and ordered that this amount not be added to income.

Regarding the remaining Rs. 17,00,000/-, the Tribunal found that the assessee submitted bank statements and cash flow statements indicating withdrawals and redeposits. The AO's conclusion that withdrawals were small and insufficient was contradicted by the bank statements. To ensure justice and proper verification, the Tribunal remitted this issue back to the AO for detailed scrutiny of the cash withdrawals and redeposits, directing the AO to provide the assessee a proper opportunity of being heard. This remand was intended to verify the genuineness of the transactions and ensure that the addition, if any, is based on verified facts and not mere suspicion or conjecture.

The Tribunal did not adjudicate jurisdictional objections raised by the assessee, focusing solely on the merits of the additions and evidentiary issues.

In conclusion, the Tribunal partly allowed the appeal by: (a) condoning the delay in filing the appeal; (b) accepting the genuineness of Rs. 9,00,000/- cash gifts from the brothers as supported by affidavits and PAN details; and (c) remitting the issue of Rs. 17,00,000/- cash deposits for fresh verification by the AO with directions to afford the assessee an opportunity of being heard.

Verbatim crucial legal reasoning includes the Tribunal's observation: "mere filing of affidavit is not suffice to prove the proof of evidence and further observed that identity alone is not sufficient, genuineness and creditworthiness have also to be proved to establish that certain receipts are not in the nature of income." However, the Tribunal also noted that "tax authorities have rejected the abovesaid affidavits on gross basis" and that "it is normal in the families to gather funds for the marriage and the brothers have filed affidavit confirming giving of gifts for the purpose of marriage."

The core principles established are: (1) Delay in filing appeals can be condoned on reasonable grounds such as serious health issues with supporting evidence; (2) Additions on account of unexplained cash deposits require a thorough judicial examination of the source, including genuineness and creditworthiness of donors; (3) Mere affidavits without corroborative evidence may not suffice, but rejection on a gross basis without considering familial and customary contexts is improper; (4) The AO must apply mind and verify facts diligently, providing the assessee adequate opportunity of hearing before making additions; and (5) Remand to the AO is appropriate where factual verification is incomplete or disputed.

The final determinations on each issue are: the delay in filing the appeal is condoned; Rs. 9,00,000/- cash gifts from brothers are accepted as genuine and not taxable; the balance cash deposits of Rs. 17,00,000/- require further verification and are remitted to the AO; and other grounds, including jurisdictional objections, remain undecided but the appeal is partly allowed on merits.