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Income Tax Appellate Tribunal, ‘D’ BENCH : CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI ABRAHAM P. GEORGE]
आदेश / O R D E R
PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER
Assessee through this appeal assails an order dated 15.09.2016 of ld. Commissioner of Income Tax (Appeals)-2, Tiruchirappalli, in which an addition of �11,53,500/- made by the ld.
ITA No.794/Mds/2017. :- 2 -:
Assessing Officer was confirmed by the ld. Commissioner of Income Tax (Appeals).
Facts apropos are that assessee a dealer in Edible Oil had filed his return of income for the impugned assessment year disclosing income of �96,000/-. Ld. Assessing Officer was having information that assessee had deposited �11,53,500/- in his saving bank account with UTI Bank in cash. As per the ld. Assessing Officer no explanation was forthcoming from the assessee for the credits in the bank account. He completed the assessment by making an addition of �11,53,500/- u/s. 69 of the Income Tax Act, 1961 (in short ‘’the Act’’).
Aggrieved, assessee moved in appeal before the ld. Commissioner of Income Tax (Appeals). Argument of the assessee was that cash deposits were made on various days and telescoping with withdrawals should be given. As per the assessee, the deposits in the bank were only withdrawals from the other banks of the assessee.
However, ld. Commissioner of Income Tax (Appeals) was not impressed. According to him, assessee’s request for considering for telescoping adjustment between cash deposits and cash withdrawals could not be acceded since there was no link established between the withdrawals and the deposits. Relying on the decision of Mumbai Bench of the Tribunal in the case of M.H. Raney vs. ITO 145 ITD 573,
ITA No.794/Mds/2017. :- 3 -: ld. Commissioner of Income Tax (Appeals) confirmed the addition made by the ld. Assessing Officer.
Now before us, ld. Authorised Representative strongly assailing the orders of the lower authorities submitted that assessee was a dealer in Edible Oil. As per the ld. Authorised Representative, ld. Assessing Officer had not made any enquiry on the type of business of the assessee or its connection with the deposits. Submission of the ld. Authorised Representative was that the question whether Section 69 of the Act could be applied under a given set of facts was a jurisdictional one. According to him, powers given to the ld. Assessing Officer u/s. 69 of the Act was discretionary and hence he could not take a presumption that absence of explanation from the assessee would automatically trigger an addition. Reliance was placed on the judgment of Jurisdictional High Court in the case of Midland Theatres vs. AICT, 350 ITR 676.
Per contra, ld. Departmental Representative submitted that grounds raised by the assessee in the appeal primarily sought for telescoping of deposits with withdrawals and this by implication meant that assessee was accepting the credits in the bank account to be his income. Further, as per the ld. Departmental Representative, assessee could not produce any evidence for proving the nexus
ITA No.794/Mds/2017. :- 4 -: between withdrawals and deposits and hence failed to establish the vital link that was required for allowing a telescoping. Reliance was once again placed on the decision of Mumbai Bench of the Tribunal in the case of M.H. Raney (supra).
We have considered the rival contentions and perused the 6. orders of the authorities below. First page of the assessment order mentions the nature of the business of the assessee as dealing in Edible Oil. It is true that assessee could not offer any explanation before the ld. Assessing Officer with regard to the credits in his bank account. But assessee did submit that he was having one more bank account with ICICI Bank, Heber Road Branch, Trichy, apart from the account with UTI Bank, Thillainagar, Salai Road, Trichy. Section 69 of the Act which has been used by the ld. Assessing Officer for making the addition for the cash deposits in the bank account of the assessee is reproduced hereunder:-
‘’Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year’’.
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Assessee had in its grounds before the ld. Commissioner of Income Tax (Appeals) specifically pleaded for telescoping between deposits with drawings. No doubt assessee was not able to show the link between his business in Edible Oil and deposits in the bank account.
However, by requesting for a telescoping adjustment, assessee was indirectly explaining the deposits to have been made from earlier withdrawals. While Sec.69 of the Act clearly apply in the given fact situation, ld. Assessing Officer failed to give reasons why telescoping adjustment could not be allowed to the assessee. Ld. Commissioner of Income Tax (Appeals) had relied on a decision of Mumbai Bench of the Tribunal in the case of M.H. Raney (supra) for not allowing the telescopic adjustment sought by the assessee. In the said case, claim of the assessee was that deposits were on account of recycling of funds and therefore only peak credit should be considered for addition.
This claim was rejected for a reason that scrutiny revealed such claim to be inconsistent with assessee’s explanation that the amounts were possibly used for charitable purpose and there were some withdrawals by cheques for personal purposes on regular basis. In the case before us, there is nothing on record to show how the withdrawals were used and whether assessee had used the withdrawals for personal use. In the circumstances, we are of the opinion that the issue requires a fresh look by the ld. Assessing Officer. Ld. Assessing Officer has to ITA No.794/Mds/2017. :- 6 -: consider whether telescopic adjustment could be given to the assessee and also bring out how the ingredients required to make an addition u/s. 69 of the Act has been satisfied. We therefore set aside the orders of the lower authorities and remit the issue back to the file of the ld. Assessing Officer for consideration afresh in accordance with law.
In the result, the appeal of the assessee is partly allowed for 7. statistical purpose.
Order pronounced on Wednesday, the 8th day of November, 2017, at Chennai.