2025 (6) TMI 1383 - AT - Income Tax

Unexplained deposits in bank account - receipt of cash from the father of the assessee and his other two brothers on various dates which was deposited in the bank account of the assessee - HELD THAT - Out of the said cash parents of the assessee meet out their day to day expenses thus it cannot be acceptable that the father of the assessee was having cash of INR 3, 67, 400/- available with him after meeting out their day to day needs. As seen that almost on monthly basis cash was given to the assessee when his father was receiving only INR 12, 000/- monthly from his sons. It is not clear as to how and from where he is able to give the assessee more cash that what he is receiving from his sons. Thus the claim of the assessee that the cash was received from his father was deposited in the bank account cannot be accepted. Since the immediate source of cash was claimed as the receipts from his father for which we have already observed that father was not having any source to earn this cash. Therefore no infirmity in the order of the Ld.CIT(A) in confirming the addition in the hands of the assessee on account of cash deposits made in the bank account as unexplained u/s 69 of the Act. Decided against assessee.

Summary

The core legal questions considered by the Tribunal in this appeal pertain primarily to the treatment of unexplained cash deposits under the Income Tax Act, 1961, specifically:

• Whether the addition of INR 2,43,330/- towards unexplained cash deposits in the assessee's bank account under section 69 read with section 115BBE of the Act was justified;
• Whether the charging of interest under section 234B of the Act was legally sustainable;
• Additional procedural rights reserved by the assessee to amend or withdraw grounds of appeal.

Issue-wise detailed analysis is as follows:

1. Justification of Addition of INR 2,43,330/- as Unexplained Cash Deposits under Section 69 r.w.s. 115BBE

Relevant legal framework and precedents: Section 69 of the Income Tax Act deals with unexplained investments or cash found with the assessee, which may be treated as income if the assessee fails to satisfactorily explain the source of such cash. Section 115BBE imposes a special tax rate on income arising from undisclosed sources, including unexplained cash. The burden lies on the assessee to establish the genuineness and source of the cash deposits to avoid additions under these provisions.

Court's interpretation and reasoning: The Tribunal examined the facts surrounding the cash deposits totaling INR 3,67,400/- made on various dates in the assessee's bank account, which the assessee claimed were sourced from his father. The father submitted an affidavit asserting that the cash originated from monthly contributions of INR 12,000/- received from the assessee and his brothers, which he purportedly saved after meeting day-to-day expenses.

The Tribunal scrutinized this claim critically, noting the inconsistency between the father's alleged monthly income of INR 12,000/- and the substantial cash amounts given to the assessee on multiple occasions. The cash transfers ranged widely, with some deposits as high as INR 49,500/-, cumulatively amounting to a sum that was not reconcilable with the father's stated monthly receipts and expenses. The Tribunal found it implausible that the father could accumulate and dispense such significant cash amounts regularly when his declared source was limited and his expenses ongoing.

Key evidence and findings: The affidavit filed by the father was the primary documentary evidence. However, the Tribunal found that the affidavit did not satisfactorily explain the source of the cash. The pattern and quantum of cash deposits were inconsistent with the stated source. No corroborative evidence was presented to establish alternate sources of income or savings by the father.

Application of law to facts: Given the failure to provide a credible and verifiable source for the cash, the Tribunal upheld the addition under section 69, treating the deposits as unexplained cash. The Tribunal relied on the principle that where the immediate source is not satisfactorily explained, the addition is justified. The Tribunal also noted that the lower appellate authority had already deleted other additions and disallowances, granting substantial relief, but rightly confirmed the addition related to unexplained cash deposits.

Treatment of competing arguments: The assessee argued that the cash was legitimately received from his father, who was a regular taxpayer and thus the source should not be doubted. The assessee also submitted an affidavit to support this claim. The Revenue contended that the father's income was insufficient to justify such cash transfers and that the addition was correctly made. The Tribunal sided with the Revenue, emphasizing the inconsistency and lack of credible explanation.

Conclusion: The Tribunal dismissed the claim of the assessee regarding the source of cash and upheld the addition of INR 2,43,330/- as unexplained cash deposits under section 69 read with section 115BBE.

2. Charging of Interest under Section 234B

Relevant legal framework: Section 234B of the Income Tax Act mandates charging interest for default in payment of advance tax. If the assessee fails to pay advance tax or pays less than 90% of the assessed tax, interest is levied on the shortfall.

Court's interpretation and reasoning: The Tribunal noted the assessee's ground challenging the interest levied under section 234B but did not elaborate extensively on this point in the judgment. The absence of detailed discussion suggests the Tribunal either found no merit in the contention or considered the issue subsumed within the main findings related to the addition of unexplained income, which naturally attracts interest for default in advance tax payments.

Key evidence and findings: The record indicates that the assessee declared a significantly lower income than ultimately assessed, which would have resulted in a shortfall in advance tax payments.

Application of law to facts: Given the confirmed addition of unexplained income, the interest under section 234B is consequential and justified.

Treatment of competing arguments: The assessee contended that interest should not be charged due to the disputed additions. The Revenue maintained that interest is mandatory upon default.

Conclusion: The Tribunal implicitly upheld the charging of interest under section 234B by dismissing the appeal in entirety, including this ground.

3. Procedural Rights of the Assessee to Amend Grounds of Appeal

The assessee reserved the right to add, submit, alter or withdraw grounds before or on the date of hearing. This is a procedural prerogative recognized under the appellate process to ensure fair adjudication. No specific issue arose from this ground in the judgment.

Significant holdings:

"Since the immediate source of cash was claimed as the receipts from his father for which, we have already observed that father was not having any source to earn this cash. Therefore, we find no infirmity in the order of the Ld.CIT(A) in confirming the addition of INR 2,43,330/- in the hands of the assessee on account of cash deposits made in the bank account as unexplained under s. 69 of the Act."

Core principles established include:

• The burden of proof lies on the assessee to satisfactorily explain the source of cash deposits to avoid additions under section 69.
• Inconsistent or implausible explanations regarding the source of cash, especially when immediate sources are insufficient or unverified, justify additions as unexplained income.
• Interest under section 234B is consequential upon confirmed additions and default in advance tax payments.

Final determinations:

• The addition of INR 2,43,330/- as unexplained cash deposits under section 69 r.w.s. 115BBE was upheld.
• The interest charged under section 234B was implicitly upheld.
• The appeal was dismissed in its entirety, confirming the order of the Commissioner of Income Tax (Appeals) on the disputed addition.