2025 (6) TMI 1793 - AT - Income Tax

Addition u/s 68 r.w.s. 115BBE - unexplained cash credit in bank accounts - CIT(A) deleted addition - Assessee contended that bank accounts in which the amounts in cash was deposited are pertaining to M/s Sahara India and not of the Assessee HELD THAT - CIT(A) found that none of the bank accounts are belongs to the Assessee and all the bank accounts are belong to M/s Sahara India wherein the Assessee is only an authorized signatory and her PAN was wrongly linked to the said bank accounts by the bank. CIT(A) has found that PAN number of the Assessee was erroneously uploaded by the bank officials to those bank accounts instead of uploading the PAN number of the firm i.e. M/s Sahara India. AO has not established in any manner whatsoever that the Assessee was the beneficiary of the cash deposited in the bank accounts of M/s Sahara India firm. Also not the case of the AO that the cash so deposited in the firm has been subsequently transferred to the account of the Assessee and the AO has not given a single instance of any money having been transferred from the account of M/s Sahara India firm to the Assessee s account. CIT(A) has deleted the addition based on the Certificates given by the Bank that the bank accounts are not belongs to the Assessee and the same are belongs to M/s Sahara India. As Department of Revenue has not brought any contrary evidence on record against the findings of the Ld. CIT(A) the grounds of appeal raised by the Revenue are dismissed.

Summary

The core legal questions considered in this appeal pertain to the addition made under section 68 read with section 115BBE of the Income Tax Act, 1961, regarding unexplained cash credits in the assessee's bank accounts. Specifically, the issues are:

1. Whether the addition of Rs. 7,38,69,563/- on account of unexplained cash credits under section 68 read with section 115BBE was justified.

2. Whether the bank accounts in which the cash deposits were made belong to the assessee or to a third party, namely M/s Sahara India.

3. Whether the assessee was the beneficial owner of the cash deposited in those accounts.

4. Whether the Assessing Officer (AO) and subsequently the Commissioner of Income Tax (Appeals) (CIT(A)) correctly applied the legal principles and evidentiary standards in arriving at their respective conclusions.

Issue 1: Justification for Addition under Section 68 r.w.s. 115BBE

Relevant Legal Framework and Precedents: Section 68 of the Income Tax Act deals with unexplained cash credits, where the burden lies on the assessee to satisfactorily explain the nature and source of the credit. Section 115BBE imposes a higher rate of tax on unexplained cash credits. The legal principle is that if the assessee fails to satisfactorily explain the source of cash credits, the amount is added to income and taxed accordingly. Precedents emphasize the importance of documentary evidence and proof of ownership or beneficial interest in the credited amounts.

Court's Interpretation and Reasoning: The AO initially treated cash deposits amounting to Rs. 7,38,96,563/- as unexplained cash credits in the bank accounts allegedly belonging to the assessee. The AO's reasoning was based on the fact that two bank accounts maintained with Punjab National Bank and Balotra Urban Cooperative Bank were in the name of the assessee, and the cash deposits therein were unexplained.

Key Evidence and Findings: The assessee contested that the bank accounts in question did not belong to her but to M/s Sahara India, a third party. The assessee submitted a list of 37 bank accounts certified by M/s Sahara India to support this claim. During appellate proceedings, the assessee furnished additional documents under Rule 46A of the Income Tax Rules. The CIT(A) called for a remand report from the AO, who submitted it, and the assessee filed a rejoinder.

Application of Law to Facts: The CIT(A), after considering the remand report and rejoinder, found that none of the bank accounts belonged to the assessee; rather, all were of M/s Sahara India. It was established that the assessee was only an authorized signatory on those accounts. The PAN number of the assessee was erroneously linked to the bank accounts by bank officials instead of the PAN of M/s Sahara India. The AO failed to establish that the assessee was the beneficial owner of the cash deposited or that the funds were transferred from those accounts to the assessee's personal accounts.

Treatment of Competing Arguments: The Revenue argued that the CIT(A) erred in deleting the addition and sought remand for further verification, citing changed stand by banks during remand. The assessee countered by relying on bank statements, certificates, and documents proving the accounts belonged to M/s Sahara India and that the PAN linkage was erroneous. The CIT(A) accepted the assessee's arguments and documentation, finding no evidence to support the Revenue's claim that the assessee was the beneficial owner.

Conclusion: The addition under section 68 read with section 115BBE was not justified as the AO failed to prove that the cash deposits belonged to the assessee or that she was the beneficial owner. The CIT(A)'s deletion of the addition was upheld.

Issue 2: Ownership and Beneficial Interest in Bank Accounts

Relevant Legal Framework and Precedents: Ownership and beneficial interest in bank accounts are critical in determining the taxability of credits. Mere authorized signatory status does not confer ownership or beneficial interest. Courts have held that the PAN linked to bank accounts must be correct, and erroneous linkage cannot be used to attribute ownership.

Court's Interpretation and Reasoning: The CIT(A) found that the bank accounts were owned by M/s Sahara India and that the assessee was only an authorized signatory. The PAN of the assessee was mistakenly linked to these accounts by bank officials. The AO did not provide any evidence that the assessee was the beneficial owner or that funds were transferred to her account.

Key Evidence and Findings: The assessee produced bank certificates confirming ownership of the accounts by M/s Sahara India, bank statements, and other documents. The AO's inability to produce contrary evidence or demonstrate beneficial ownership was significant.

Application of Law to Facts: The CIT(A) applied the principle that ownership must be established by evidence and that mere authorized signatory status or erroneous PAN linkage does not establish ownership. The AO's failure to establish beneficial ownership led to deletion of the addition.

Treatment of Competing Arguments: The Revenue's contention that the assessee was the beneficial owner was unsupported by evidence. The CIT(A) and the Tribunal rejected this argument for lack of proof.

Conclusion: The bank accounts belong to M/s Sahara India, and the assessee is not the beneficial owner. The AO's addition based on ownership was therefore unsustainable.

Issue 3: Procedural and Evidentiary Aspects

Relevant Legal Framework and Precedents: Rule 46A of the Income Tax Rules allows the assessee to produce additional evidence during appellate proceedings. The AO and appellate authorities must consider all relevant material on record before making a decision.

Court's Interpretation and Reasoning: The CIT(A) properly exercised discretion under Rule 46A to call for a remand report and consider additional documents filed by the assessee. The remand report and rejoinder were carefully examined before reaching the conclusion to delete the addition.

Key Evidence and Findings: The remand report submitted by the AO did not contradict the assessee's claim of non-ownership. The assessee's rejoinder reinforced the position with documentary evidence.

Application of Law to Facts: The appellate authority's approach was consistent with principles of natural justice and evidentiary standards. The Tribunal found no error in the CIT(A)'s procedure or reasoning.

Treatment of Competing Arguments: The Revenue's plea for remand to verify the assessee's claims was rejected as the CIT(A) had already considered the material and found no infirmity.

Conclusion: The procedural steps taken by the CIT(A) were appropriate, and the evidentiary burden was correctly applied.

Significant Holdings:

"The PAN number of the Assessee was erroneously uploaded by the bank officials to those bank accounts instead of uploading the PAN number of the firm i.e. M/s Sahara India."

"The AO has not established in any manner whatsoever that the Assessee was the beneficiary of the cash deposited in the bank accounts of M/s Sahara India firm."

"It is not the case of the AO that the cash so deposited in the firm has been subsequently transferred to the account of the Assessee and the AO has not given a single instance of any money having been transferred from the account of M/s Sahara India firm to the Assessee's account."

"In view of the fact that the Department of Revenue has not brought any contrary evidence on record against the findings of the Ld. CIT(A), we find no reason to disbelieve the finding of the Ld. CIT(A)."

Core principles established include the necessity of establishing beneficial ownership for additions under section 68, the inadmissibility of erroneous PAN linkage as evidence of ownership, and the importance of documentary evidence in substantiating claims of ownership or non-ownership of bank accounts.

Final determinations are that the addition of Rs. 7,38,69,563/- under section 68 read with section 115BBE was rightly deleted by the CIT(A), the bank accounts belong to M/s Sahara India and not the assessee, and the assessee was not the beneficial owner of the cash deposits. Consequently, the appeal filed by the Revenue was dismissed.