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Facts
The assessee, engaged in wine trading, filed his return declaring income. During assessment, the AO noticed significant cash deposits in the assessee's bank accounts. Upon inquiry, the assessee claimed these were from sales, but the AO found a discrepancy between total sales and cash deposits.
Held
The Tribunal observed that the assessee had furnished documentary evidence to explain the cash deposits, which were not considered by the First Appellate Authority (NFAC). Therefore, the Tribunal restored the issue to the AO for fresh adjudication after verifying the evidences.
Key Issues
Whether the addition made by the AO under Section 68 of the Act is sustainable when documentary evidence furnished by the assessee to explain cash deposits was not considered.
Sections Cited
68
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
O R D E R Per Saktijit Dey, VP: This is an appeal by the assessee against order dated 03.09.2024 passed by National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2016-17. 2. The solitary ground raised by the assessee reads as under:
1. On the facts and in the circumstances of the case, and in law, the Ld. CIT(A) erred in confirming the addition of Rs. 1,34,66,110/- made by the Ld. AO u/s. 68 of the Act. The appellant, therefore, prays that the aforesaid addition be deleted.”
Briefly stated, assessee, a resident individual, is stated to be engaged in the business of trading in wines through his proprietary concern M/s Delta Wines. For the assessment under dispute, assessee filed his return of income on 27.02.2018, declaring income of Rs.4,07,420/-.
In course of assessment proceeding, while verifying the bank statements of the assessee, the Assessing Officer (AO) noticed that in the previous year relevant to the assessment year under dispute the assessee had deposited cash in various bank accounts standing in his name. On a query being made, the assessee stated that the cash deposits were out of sales effected during the year. On verifying the Profit & Loss account, the AO observed that the total sales reflected therein amounted to Rs.3,24,53,740/- as against the cash deposited of Rs.4,59,19,850/- in the bank accounts. Therefore, he called upon the assessee to explain the source of excess cash deposits. Alleging that the assessee could not explain the source of excess cash deposits in the bank account despite being given sufficient opportunity, the AO added back the excess cash deposits of Rs.1,34,66,110/- to the income of the assessee. Though, the assessee contested the aforesaid addition before learned First Appellate Authority, however, he was unsuccessful.
Before us, the primary grievance of the assessee is to the effect that prior to transfer of the appeal to the NFAC, in course of proceeding before the First appellate Authority, the assessee had furnished voluminous documents to explain the source of cash deposits. He submitted, after the appeal was transferred to NFAC, those documentary evidences were totally ignored and addition has been sustained. In support of his contention regarding furnishing of documentary evidences, the assessee placed reliance on the factual paper book submitted before us. Thus, he submitted, the matter may be restored back to the AO for consideration of the evidences explaining the source of cash deposit and deciding the matter afresh.
Per contra, learned Departmental Representative (DR) strongly relied upon the observations of the AO and First Appellate Authority 7. We have considered rival submissions and perused the materials on record. On careful examination of facts and materials on record including the order of the First Appellate Authority, we observed that in course proceeding before the First Appellate Authority, the assessee had furnished various documentary evidences. In fact, in paragraph-5 of the impugned order, the First Appellate Authority has partially accepted the aforesaid factual position. However, on examination of materials placed in the factual paper book, it is observed that voluminous documents furnished by the assessee in course of proceeding before the First Appellate Authority prior to transfer of appeal to NFAC have not at all being considered while deciding the appeal. The acceptability or otherwise of evidences furnished by the assessee can only be decided after verifying the nature of evidences. Without at all looking at the evidences assessee’s explanation regarding the source of cash deposit cannot be rejected. In the facts of the present case, we are convinced that the evidences furnished by the assessee should have been looked into either by the First Appellate Authority or he could have directed the AO to examine them and furnish a report. The aforesaid exercise having not been done while deciding the appeal, we are inclined to restore the issue arising in the appeal to the AO for fresh adjudication after verifying the evidences furnished by the assessee. While deciding the issue, the AO must provide due and reasonable opportunity of being heard to the assessee. Ground is allowed for statistical purposes.
In the result, appeal is allowed for statistical purposes.
Order pronounced in the open court on 25/ 02/2025