2025 (7) TMI 1479 - AT - Income Tax

Addition made u/s 69A - unexplained cash credits - assessee submitted that the assessee has deposited cash in the Bank and the amount deposit after business receipt of the assessee and the cash withdrawal from the Bank ITR could not file Income-tax return because of corona pandemic later on window of website of the department was closed - also deposit with the Axis Bank belong to wife who is in Grain Business and AO did not care about withdrawal from the Bank. HELD THAT - We observed that there was huge deposit of cash in the Bank account of the assessee but on perusal of the bank statement it is revealed that there were simultaneously withdrawals from the Bank account leaving the negligible balance in the Bank account of the assessee. Now 1st of all we have to see whether such deposit and withdrawal from the Bank is representing the trading activities of the assessee. We further observed that the Revenue has not brought anything on record suggesting that the assessee had so much of the income as computed by the assessing officer. AO was under the obligation to bring on record to demonstrate that the assessee has made some investment or incurred some expenses out of such income but there is no such information available with the Revenue. Providing sufficient details but that does not lead to reach the conclusion that the amount deposited in the Bank represents the undisclosed income of the assessee. As such the deposits in the Bank. Cannot be treated as income without considering withdrawal considering the peculiar circumstance of the case. We are of the view that the case neither properly adjudicated by the Ld. AO nor properly decided by the CIT(A) we are of the view that case need to be adjudicated on merit. We nearby remand back the case to the file of Ld.AO/JAO with direction for verification of Business income declared by the assessee Nature of business activities and source of income to investigate separate business of wife smt Bhavnaben Soni and considere the withdrawal from the Bank during the year. We remit back to the file of the Assessing officer for fresh adjudication.

Summary

ISSUES:

Whether unexplained cash deposits in bank accounts can be treated as undisclosed income under Section 69A of the Income Tax Act, 1961.Whether the Assessing Officer and Commissioner of Income Tax (Appeals) erred in ignoring the cash withdrawals corresponding to the deposits while making additions under Section 69A.Whether the business income and separate business of the assessee's spouse should be considered in the assessment.Whether the failure to file original Income Tax Return (ITR) for the assessment year justifies reopening assessment under Section 147 read with Sections 144 and 144B.Whether the Assessing Officer and CIT(A) adequately considered the assessee's submissions and evidence regarding source and genuineness of cash deposits.

RULINGS / HOLDINGS:

The unexplained cash deposits cannot be treated as income under Section 69A without considering corresponding cash withdrawals; "deposits in the Bank cannot be treated as income without considering withdrawal considering the peculiar circumstance of the case."The Assessing Officer's and CIT(A)'s "one sided approach" ignoring substantial cash withdrawals is "not justified and not valid in the eye of law."The Assessing Officer failed to investigate the separate business of the spouse and wrongly taxed the entire turnover in the hands of the assessee, which was "illegal and incorrect and against the natural justice and against judicial pronouncement."The reopening of assessment under Section 147 read with Sections 144 and 144B was valid due to non-filing of original ITR and absence of explanation for cash deposits.The case was not properly adjudicated by the AO or CIT(A); hence, the matter is remanded for fresh adjudication on merit with directions to verify business income, nature of business activities, spouse's business, and bank withdrawals, and to allow the assessee to file ITR and produce books of account and supporting documents.

RATIONALE:

The Court applied provisions of the Income Tax Act, 1961, notably Sections 69A (unexplained cash credits), 147 (reassessment), 144 and 144B (summary assessment and reassessment procedures), emphasizing the principle that unexplained deposits must be considered in light of withdrawals and overall business activity.The Court underscored the requirement that the Revenue must bring on record evidence of undisclosed income, such as investments or expenses incurred from such income, which was absent.The Court noted the necessity to consider the spouse's independent business and related bank accounts, rejecting the approach of taxing all turnover in the assessee's hands without evidence.The decision reflects a doctrinal emphasis on balanced examination of bank transactions, requiring both deposits and withdrawals to be considered before concluding undisclosed income under Section 69A.The remand for fresh adjudication reflects the Court's insistence on due process, proper opportunity to the assessee, and comprehensive evaluation of evidence rather than summary additions.