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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI V. DURGA RAO & SHRI G. MANJUNATHA
PER G. MANJUNATHA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is directed against the order passed by the learned Commissioner of Income Tax (Appeals)-5, Chennai, dated 30.01.2020 and pertains to assessment year 2004-05.
The assessee has raised the following grounds of appeal: “1. The order of the Commissioner of Income Tax (Appeals) - 5, Chennai dated 30.01.2020 in l.T.A.No.34/CIT(A)-5/2018-19, for the above mentioned Assessment Year is contrary to law, facts, :-2-: ITA. No:373/Chny/2020 and in the circumstances of the case.
2. The CIT (Appeals) erred in confirming the assessment of Rs.74,10,000/being the cash credits on the application of section 68 of the Act in the computation of taxable total income without assigning proper reasons and justification.
3. The CIT (Appeals) failed to appreciate that the provisions of section 68 of the Act had no application to the facts of the case and ought to have appreciated that the initial burden as per the statutory provisions was fully discharged, thereby vitiating the related findings.
4. The CIT (Appeals) failed to appreciate that the explanation offered in the first round and maintained in the present round of proceedings was reasonable and bonafide, thereby vitiating the sustenance of the addition made and disputed in the present appeal.
5. The CIT (Appeals) failed to appreciate that having noticed the source for the cash credits and further having taken on record the affidavits filed to substantiate the source for the cash credits, the sustenance of the said addition without rejecting the affidavits should be reckoned as bad in law
6. The CIT (Appeals) failed to appreciate that the findings recorded from para 5 of the impugned order in this regard were wrong, erroneous, unjustified, incorrect, invalid and not sustainable both on facts and in law.
7. The CIT (Appeals) failed to appreciate that the assessment of Rs.74,10,000/- in invoking section 68 of the Act on various grounds was wrong, erroneous, unjustified, incorrect, invalid and not sustainable both facts and in law.
8. The CIT (Appeals) failed to appreciate that there was no proper opportunity given before passing the impugned order and any order passed in violation of the principles of natural justice is nullity in law.
9. The Appellant craves leave to file additional grounds/arguments at the time of hearing.”
:-3-: ITA. No:373/Chny/2020 3. The brief facts of the case are that, in the original assessment completed u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) on 28.12.2006, the AO has made addition of Rs. 74,10,000/- towards unexplained cash credit u/s. 68 of the Act, for cash deposits found in the bank account of the assessee. In the first round of litigation, the Tribunal has set aside the issue to the file of the AO with a direction to the Assessing Officer to verify the evidence as may be filed by the assessee to justify source for cash deposit found in his bank account. In the second round of litigation, the AO has made addition towards cash deposits found in bank account on the ground that the assessee could not submit any evidence in support of his claim that source for cash deposit is out of known source of income. The assessee carried the matter in appeal before the first appellant authority, and before CIT(A), the assessee has filed affidavit from nine persons claimed to be close relatives of the assessee and argued that he has deposited cash into bank account out of money received from his relatives, and said sum was received by his relatives against sale of old jewellery belonging to the appellant’s deceased wife. The Ld. CIT(A) did not accept :-4-: ITA. No:373/Chny/2020 explanation furnished by the assessee and according to the CIT(A), except affidavit the assessee could not file any evidence to justify source for cash deposit found in his bank account. Thus, rejected arguments and dismissed appeal filed by the assessee. Aggrieved by the Ld. CIT(A) order, the assessee is in appeal before us.
The Ld. Counsel for the assessee submitted that, the assessee has filed an affidavit from nine persons to explain source for cash deposit found in his bank account. The assessee had also explained source for said cash deposit and argued that the family members has received cash for sale of old jewellery which belongs to assessee’s deceased wife. The CIT(A) ignored the affidavit filed by the assessee and sustained the additions made towards cash deposits. Therefore, he submitted that if at all the arguments of the assessee is not accepted, then reasonable income can be estimated towards cash deposits found in bank account.
The Ld. DR, on the other hand supporting the order of the Ld. CIT(A) submitted that, except the affidavit from certain :-5-: ITA. No:373/Chny/2020 parties, assessee could not file any other evidences to justify source for cash deposit. Further, so called affidavit was first time filed before the CIT(A) in second round of litigation. In absence of evidences to support affidavit, the CIT(A) has rightly rejected arguments of the assessee and sustained additions made towards cash deposit and thus, there is no reason to interfere with the order of the ld. CIT(A).
We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The AO has made additions towards cash deposit u/s. 68 of the Act as unexplained cash credits, on the ground that the assessee could not satisfactorily explain source for cash deposit. It was the explanation of the assessee before the lower authorities that source for cash deposit is out of amount received from sale of jewellery belongs to his deceased wife, and to support his contentions the assessee has filed sworn affidavit from nine close relatives. Having heard both the sides and considered relevant material available on record, we find that although the assessee could not justify cash deposit in his bank account with valid evidence, but in our considered :-6-: ITA. No:373/Chny/2020 view the Ld. CIT(A) should not have summarily rejected affidavit filed by nine persons who claimed to be closed relatives of the assessee. We are further of the opinion that, when the assessee has filed affidavit from certain persons, it is the duty of the authorities below to verify the claim of the assessee and summon the persons from whom the assessee claims to have received cash. In this case, the Ld. CIT(A) summarily rejected affidavit filed by the assessee to justify source for cash deposit without carrying out further enquiries to ascertain the claim of the assessee, in light of affidavit filed by various persons. Therefore, we are of the considered view that neither the assessee justified source for cash deposit with necessary evidence, nor the CIT(A) reached a the conclusion that cash deposits with bank account is unexplained income of the assessee, which can be assessed u/s. 68 of the Act. Under these facts, the only option left with us is to settle dispute between the parties by restoring some sought of estimation of income towards cash deposits found in the bank account of the assessee. Therefore, to meet ends of justice and also to resolve dispute between the parties, we deem it appropriate to direct the AO to estimate 20% profit on total cash deposits :-7-: ITA. No:373/Chny/2020 found in the bank account of the assessee. Hence, we direct the AO to sustain 20% profit on total cash deposits and delete balance amount of addition made u/s. 68 of the Act.
In the result, appeal filed by the assessee is partly allowed.