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2025 (3) TMI 1276 - AT - Income TaxAddition being deposits in bank account by appellant an NRI treating the same as Unexplained credit - assessee is a NRI and a citizen of UK having no independent source of income in India - HELD THAT - It is an undisputed fact that the cash was withdrawn by the assessee and merely if there is a time gap between withdrawal of cash and re-deposit of the same by the assessee in his bank account the same cannot be the subject matter of the addition and cannot be treated as undisclosed income of the assessee unless the Department gives some conclisive evidence that the cash which was earlier withdrawn by the assessee was not available for re-deposit by such assessee (and that the amount had been spent / utilized by the assessee for some other purpose). We observe that once it has not been disputed by the Department that assessee had withdrawn a sum from his NRO bank account and there is no allegation or specific finding with regards to how this sum was spent / utilized by the assessee and why the same was not available with the assessee for re-depositing in our considered view it has to be presumed that the subsequent re-deposit made by the assessee was sourced out of earlier withdrawals by the assessee from his NRE bank account. Appeal of the assessee is allowed.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment include:
ISSUE-WISE DETAILED ANALYSIS 1. Addition of Rs. 13,43,000/- as Unexplained Credit Relevant Legal Framework and Precedents: The relevant legal framework involves the principles governing unexplained cash credits under the Income Tax Act. The precedents cited include cases where courts have held that mere time gaps between withdrawal and re-deposit do not justify treating the amount as undisclosed income unless there is evidence of utilization elsewhere. Court's Interpretation and Reasoning: The Tribunal examined whether the addition made by the Assessing Officer was justified in light of the explanations provided by the appellant. The Court emphasized the need for concrete evidence from the Department to prove that the withdrawn cash was utilized elsewhere, which was absent in this case. Key Evidence and Findings: The appellant provided evidence of cash withdrawals from his NRE account in February 2016, totaling Rs. 19,80,000/-. The deposits in question were made during the demonetization period in December 2016. The appellant claimed that the cash was retained and subsequently redeposited, which the Department did not conclusively dispute. Application of Law to Facts: The Tribunal applied the legal principles from relevant precedents, emphasizing that the Department's failure to demonstrate the utilization of the withdrawn cash elsewhere undermined their position. The Tribunal found that the appellant's explanation was plausible and consistent with the evidence. Treatment of Competing Arguments: The Tribunal considered the Department's argument that it was improbable for cash to be retained for such a long period. However, it found that the Department's position was based on assumptions rather than evidence. The Tribunal favored the appellant's argument, supported by legal precedents, that the absence of evidence of utilization elsewhere should lead to acceptance of the appellant's explanation. 2. Validity of the Assessing Officer's Presumption Relevant Legal Framework and Precedents: The Tribunal referred to several precedents where courts have held that the retention of cash for a period, even if lengthy, does not automatically imply its utilization unless proven otherwise by the Department. Court's Interpretation and Reasoning: The Tribunal rejected the Assessing Officer's presumption that the cash must have been utilized. It emphasized that human behavior regarding cash retention varies and cannot be generalized without evidence. Key Evidence and Findings: The Tribunal noted that the Department did not provide any evidence of the cash being used elsewhere. The appellant's consistent explanation and the absence of any contrary evidence supported the appellant's case. Application of Law to Facts: The Tribunal applied the principle that the onus is on the Department to prove that the cash was utilized elsewhere. In the absence of such proof, the appellant's explanation was deemed acceptable. Treatment of Competing Arguments: The Tribunal found the Department's reliance on assumptions about human behavior unconvincing. It favored the appellant's argument, which was consistent with established legal principles and supported by evidence. SIGNIFICANT HOLDINGS Preserve verbatim quotes of crucial legal reasoning: "In the absence of finding that the amount which was previously withdrawn by the assessee had been utilized for any other purpose merely on the basis of conjecture that the amount might have been utilized for any other-purpose and was not available with the assessee for making the deposits, we are unable to accept the reasoning of the authorities below." Core principles established:
Final determinations on each issue: The Tribunal allowed the appeal, concluding that the addition of Rs. 13,43,000/- as unexplained credit was unjustified. It held that the appellant's explanation regarding the source of the cash deposits was plausible and consistent with the evidence, and the Department failed to provide evidence to the contrary.
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