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Facts
The assessee, an employee of AP State Cooperative Bank, filed his return for AY 2017-18. The AO noted a discrepancy in salary income and a cash deposit of Rs. 11,21,000/-. The AO treated the cash deposit as unexplained cash credit under Section 68 and added it to the total income.
Held
The Tribunal found that the confirmation letters contained details of loans disbursed and repayments. However, a one-to-one correlation between loan disbursement and recovery needed verification. Therefore, the issue was set aside to the AO for fresh examination.
Key Issues
Whether the cash deposit of Rs. 11,21,000/- can be treated as unexplained cash credit under Section 68 without proper verification of loan transactions.
Sections Cited
68, 143(2), 142(1), 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Hyderabad ‘A’ Bench, Hyderabad
Before: SHRI VIJAY PAL RAO & SHRI MADHUSUDAN SAWDIA
आदेश/ORDER PER MADHUSUDAN SAWDIA, A.M.: This appeal is filed by Shri Madhu Sudhan Reddy Biddal (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”), dated 14.10.2024 for the A.Y. 2017-18. 2. The assessee has raised the following grounds :
1. 3. At the outset the Ld. AR submitted that, the assessee is in appeal before the ITAT on as many as 6 grounds. He further submitted that, the ground nos.1 and 6 are generally in nature and the assessee is not pressing ground no. 2 and 3. Accordingly, the ground number 1,2,3 and 6 are not required to be separately adjudicated. Ground no. 4 and 5 are related to the addition made by the learned Assessing Officer (“Ld. AO”) on account of the cash deposit of Rs.11,21,000/- as unexplained cash credit under Section 68 of the Income Tax Act, 1961 (“the Act”).
Brief Facts of the Case as culled out from the records are that, the assessee is an individual and an employee of AP State Co- Operative Bank. He initially filed the original return of income for the A.Y. 2017-18 on 12th June 2017, declaring a total income of Rs.8,43,880/-. Subsequently, a revised return of income was filed on 7th March 2018, declaring a total income of Rs.8,43,910/-. The case of the assessee was selected for limited scrutiny under the Centralized Processing of Scrutiny Cases (CASS) to verify Cash deposits during the year, Salary income and cash withdrawals. Notices under Section 143(2) and Section 142(1) of the Act were issued by the Ld. AO to the assessee. However, no compliance was made by the assessee to these notices. On examination of the records, the Ld. AO observed a discrepancy of Rs.7,10,410/- between the gross salary reported in the Income Tax Return (ITR) and Form no. 16. He also found cash deposit of Rs.11,21,000/- in the bank account of the assessee during the year under consideration. In the absence of any explanation or documentary evidence, the AO added the difference in gross salary of Rs. 7,10,410/- to the total income and treated the cash deposit of Rs.11,21,000/- as unexplained cash credit under Section 68 of the Act. Accordingly, the Ld. AO completed the assessment u/s 143(3) of the Act on 18/11/2019 and determined the total income of the assessee at Rs.26,75,320/-.
Aggrieved by the order of Ld. AO, the assessee filed appeal before the Ld. CIT(A). During the appellate proceedings, with regards to the addition of Rs.11,21,000/-, the assessee submitted that, he was an employee of the AP State Cooperative Bank and a union leader. He often assisted lower-grade employees by providing them short-term loans from his overdraft account for household expenses. The cash deposits in his bank account represented recoveries of these short-term loans from his colleagues. However, the CIT(A) dismissed the appeal, observing that the assessee was engaged in unlicensed money-lending activities and the explanation provided by the assessee lacked genuineness, as most transactions were in cash .
Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us. The Ld. AR submitted that, the Ld. CIT(A) without appreciating the facts of the case of the assessee, dismissed the claim of the assessee. The Ld. AR produced before us the bank statements (page nos. 13 to 21 of the paper book) and confirmation letters from borrowers (page nos. 22 to 30 of the paper book), wherein, the confirmation letters provided details of the loans, including the dates and amounts of disbursement and repayment. He further submitted that some of the loan were made directly from his overdraft account, while others were made in cash. He also submitted that the cash deposits in his bank account represented recoveries of these short-term loans from his colleagues in cash. Finally, the Ld. AR prayed before the bench for the deletion of the additions Rs. 11,21,000/- made by the Ld. AO.
Per contra the Ld. DR relied on the orders of the Revenue Authorities.
We have heard the rival contentions and also gone through the record in the light of the submissions made by either side. We have also gone through the bank statements (page nos. 13 to 21 of the paper book) and also the confirmation letters from borrowers (page nos. 22 to 30 of the paper book). Upon examination, we find that the confirmation letters contain details of the loans disbursed by the assessee and the subsequent repayments by the borrowers. Some of the loans were made directly from the overdraft account, while others were made in cash. The one to one correlation of the loan given to the borrowers and the recoveries are required to be verified from the bank statements, the confirmations letters of the borrowers, the available cash in hand with the assessee and other relevant available documents with the assessee. Accordingly, we deem it appropriate to set aside the issue to the file of the Ld. AO for fresh examination and decide the issue in accordance with the law. The assessee is directed to cooperate with the Ld. AO and provide all requisite information/documents within the prescribed time frame. Accordingly, the grounds no. 3 & 4 of the assessee are allowed for statistical purposes.
In the result, the appeal of the assessee is partly allowed for statistical purposes.