2014 (10) TMI 1062 - AT - Income Tax

Addition u/s 68 - AO noticed from AIR information that the assessee has deposited cash in bank account - HELD THAT - Assessee has undertaken to fully co-operate with the tax authorities and also agreed to produce all the relevant parties who have given cash to the assessee and to whom cheques were issued. Further the assessee has also agreed to furnish all other details. We are of the view that in the interest of natural justice the assessee may be given one more opportunity to prove the cash deposits made into the bank accounts. Accordingly we set aside the order of CIT(A) on these two issues and restore them to the file of the assessing officer with the direction to examine them afresh after affording necessary opportunity of being heard to the assessee and take appropriate decision in accordance with the law. We prefer to set time frame for completion of the assessment. We direct AO to complete the assessment within three months from the date of receipt of this order. The assessee is also directed to fully co-operate with AO in completing the assessment by furnishing all the details that may be called for and by producing the parties as may be required by the assessing officer. Assessee is treated as allowed for statistical purposes.

Summary

Issues:
1. Cross objection filed by revenue barred by limitation.
2. Validity of additions made u/s 68 of the Act.

Analysis:
1. The cross objection filed by the revenue was found to be barred by limitation by 352 days without any explanation provided for the delay. Despite a defect memo sent by the registry, the delay was not rectified, leading to the dismissal of the cross objection as unadmitted.

2. The main issue in the appeal filed by the assessee was regarding the validity of additions made under section 68 of the Income Tax Act. The assessee, engaged in trading, declared a total income of Rs.63,660 for the assessment year 2009-10. The assessing officer noted significant cash deposits in various bank accounts, raising concerns about the sources of these funds. The assessee claimed to receive cash from parties, deposit it in bank accounts, and issue corresponding cheques after collecting a commission. However, the assessing officer viewed this as a means to convert black money into white and treated the deposits as unexplained cash credits under section 68 of the Act.

3. Additionally, the assessing officer observed discrepancies in another bank account maintained by the assessee, leading to further unexplained cash credit treatment under section 68. In the appellate proceedings, the assessee provided names and addresses of the parties involved, prompting a remand report from the assessing officer. Despite incomplete reports due to officer transfers, the Commissioner of Income Tax (Appeals) upheld the additions under section 68. The assessee then appealed to the Appellate Tribunal.

4. During the Tribunal hearing, the assessee's representative emphasized providing detailed party information and reconciliation of deposits with issued cheques. The Departmental Representative argued the inability to produce the concerned parties before the assessing officer. The assessee, through a letter, committed to cooperating with tax authorities, producing relevant parties, and furnishing necessary details. In the interest of natural justice, the Tribunal granted the assessee another opportunity to substantiate the cash deposits, setting a three-month timeframe for assessment completion.

5. Consequently, the appeal filed by the assessee was treated as allowed for statistical purposes, while the cross objection filed by the revenue was dismissed. The Tribunal's order, emphasizing the importance of due process and cooperation, was pronounced on October 10, 2014.