NAGENDRA SINGH,VASAI vs. INCOME TAX OFFICER, THANE

Briefly stated, the facts borne out from the records are that the assessee had filed return of income declaring total income of Rs.5,04,380/-. The case was selected for limited scrutiny under CASS for the reason “large cash deposits compared to returned income”. During the course of assessment proceedings, the Assessing Officer observed that the assessee had deposited cash aggregating to Rs.50,10,000/- in the bank accounts maintained with Allahabad Bank and Greater Bombay Co-operative Bank during the relevant financial year. Since according to the Assessing Officer the assessee could not satisfactorily explain the source of entire cash deposits during the assessment proceedings, he treated the entire amount of Rs.50,10,000/- as unexplained money under section 69A and completed the assessment accordingly.

Being aggrieved, the assessee preferred appeal before the learned CIT(A) and furnished detailed explanation along with documentary evidences explaining the source of cash deposits. During the appellate proceedings, the learned CIT(A)

From the remand report placed on record, it is seen that the Assessing Officer himself examined the evidences and accepted the explanation of the assessee to the extent of Rs.49,95,500/-. The remand report categorically records that the opening cash balance stood substantiated from earlier years’ records, capital account, balance sheet and past returns of income; the agricultural income declared by the assessee was accepted after verification; and the gifts received from family members were also found to be genuine upon examination of confirmations, bank statements and financial capacity of the donors. Thus, the Assessing Officer himself, after detailed verification in remand proceedings, accepted the availability and source of cash to the extent of Rs.49,95,500/-

The only aspect which was not accepted by the Assessing Officer in the remand report was the cash withdrawal of Rs.4,48,435/-. The Assessing Officer observed that since the

Before us, the learned counsel submitted that once the Assessing Officer himself, in the remand proceedings, had accepted the availability of source aggregating to Rs.49,95,500/-, then sustaining addition of Rs.4,48,435/- by the learned CIT(A) is wholly untenable and contrary to the factual findings recorded in the remand report itself. It was further submitted that the learned CIT(A) failed to appreciate that even if the explanation regarding recycling of cash withdrawals was not accepted in entirety, still the accepted source exceeded substantially the deposits made and at the highest only a negligible difference of Rs.14,500/- remained unexplained. Reliance was placed on the reconciliation statement furnished before the appellate authorities wherein

On the other hand, the learned Departmental Representative relied upon the orders of the lower authorities.

After considering the rival submissions and carefully perusing the material placed on record, including the remand report and the documentary evidences referred therein, we find considerable force in the contention advanced on behalf of the assessee. It is an undisputed fact borne out from the remand report itself that the Assessing Officer had accepted the source of cash deposits to the extent of Rs.49,95,500/-. The remand report specifically accepts the opening cash balance, agricultural income and gifts from family members after due verification. Once such sources aggregating to Rs.49,95,500/- stood accepted by the Revenue itself, then sustaining addition of Rs.4,48,435/- merely because the explanation regarding cash withdrawals was not fully accepted, leads to an incongruous and factually unsustainable result.

The learned CIT(A), while sustaining the addition of Rs.4,48,435/-, has failed to appreciate the overall cash flow and reconciliation furnished by the assessee as well as the

It is a settled proposition that additions under section 69A cannot be sustained on mere conjectures or on partial appreciation of the material on record while ignoring the accepted factual matrix. The remand report forms an integral part of appellate proceedings and once the Assessing Officer himself has accepted the explanation substantially, the learned CIT(A) could not have sustained addition beyond the actual unexplained amount emerging from such reconciliation. The approach adopted by the learned CIT(A) suffers from apparent inconsistency because the accepted sources themselves neutralize the impugned deposits except to the negligible extent of Rs.14,500/-.

Accordingly, in the entirety of facts and circumstances of the case, we hold that only the amount of Rs.14,500/- can at best remain unexplained and liable for confirmation. Consequently, the addition sustained by the learned CIT(A) to the extent of Rs.4,48,435/- is directed to be restricted to Rs.14,500/- and the balance addition is hereby deleted.

In the result, appeal of the assessee is partly allowed.