MADAN SINGH BISHT,GHAZIABAD vs. ITO, NEW DELHI

The only grievance of the assessee in this appeal relates to the confirmation of addition aggregating to Rs.24,14,049/- made by the AO u/s 68 of the Income Tax Act, 1961 (hereinafter referred to as the Act) on the basis of cash deposit entries in bank pass books.

Facts of the case in brief are that the assessee filed his return of income on 25.07.2010 declaring an income of Rs.1,65,484/- which was processed u/s 143(1) of the Act. Later on, the case was selected for scrutiny. During the course of 2 Madan Singh Bisht assessment proceedings, the AO noticed that the assessee had deposited Rs.22,50,230/-, Rs.78,685/- and Rs.82,500/- in cash in ICICI Bank, Vivek Vihar, Delhi, Canara Bank, Mayur Vihar, Delhi and Vijay Bank, Barakhamba Road, Delhi respectively. The AO was of the view that the assessee failed to discharge its onus to prove the aforesaid deposits. He, therefore, added the same to the income of the assessee. He also added interest received from the banks amounting to Rs.2,634/- u/s 68 of the Act.

Being aggrieved the assessee carried the matter to the ld. CIT(A) and furnished the written submission which had been reproduced in para 5 of the impugned order. On the submission of the assessee, the ld. CIT(A) asked the remand report from the AO which had been reproduced in para 6 of the impugned order, thereafter, the assessee furnished the rejoinder to the remand report which had been reproduced by the ld. CIT(A) in para 7 of the impugned order, for the cost of repetition, the same are not reproduced herein.

The ld. CIT(A) after considering the submissions of the assessee, remand report of the AO and rejoinder of the assessee sustained the addition by observing in para 8 of the impugned order as under:

3 Madan Singh Bisht “I have carefully considered the written submission of the appellant and also the contents of the assessment order and perused the relevant material available on record. After having carefully considered the entire facts and circumstances of the case, my conclusions on the issue raised in the grounds of appeal are as under:- During the course of appellate proceeding the appellant produced additional evidence under Rule 46A a copy of which was sent to the AO for remand report which has since been received and reproduced in the forgoing para of this order. Subsequently, a copy of remand report was sent to the appellant for rejoinder which has since been received and the same .stands reproduced in the forgoing para of this order. I have considered the remand report of the AO and also the rejoinder filed by the appellant. The assessee has raised as many as five grounds of appeal all of which are directed towards only one issue that is the nature and source of cash deposits in three bank account of the assessee. The assessee being employed with M/s Radiant Polychem Pvt. Ltd has declared the salary income as per Form 16 showing gross total income of Rs.2,75,367/- whereas amount of Rs.1,09,883/- has been claimed as deduction under chapter VI-A of the I.T. Act. In the course of assessment proceedings, the assessee was specifically asked to furnish details of bank account other than the one with Canara Bank and the Vijaya Bank. The assessee remained silent about other bank account. As against above, the AO received AIR information to suggest that assessee 4 Madan Singh Bisht has been maintaining saving bank account with ICICI Bank in which cash of Rs.21,53,230/- was deposited during financial year under consideration. In this regard, the assessee was issued show cause notice requiring him to explain the nature and source of above cash deposits. Vide above show cause notice it was made clear to the assessee that in case of non compliance the same would be treated as undisclosed income. In response the assessee has filed before the AO a letter dated 28/01/2013 alongwith revised computation of income wherein the assessee declared business income of Rs. 1,44,445/- claimed to have been earned from retail trading of chemical goods. I have perused material available on record and find that the assessee has changed his stand in his subsequent submission furnished before the AO by claiming that he was engaged in the retail trading of textile goods I have also noticed that the assessee has failed to furnish bonafide reasons for such reversal of his earlier contention It is also noticed that despite having been given sufficient time and opportunity the assessee has failed to produce any "evidence whatsoever to show/establish that he was engaged in the business of retail trading of textile goods. I have also noticed that the assessee has chosen Form 1 to file his return which is not applicable to the cases where the assessee derives income from business/profession. In this regard once again the appellant has failed to come out with any bonafide reasons for such action. Moreover, the assessee has also failed to furnish any evidence such as sale, purchase stock etc. before the AO or before me. In this regard, I am also inclined to 5 Madan Singh Bisht agree with AO's findings that the assessee being full time employee of M/s Radiant Polychem Pvt. Ltd. would hardly get sufficient spare time so as to carry out any other business activity as has been claim by the appellant. So far as, submission of revised computation during assessment proceedings before the AO showing business income of Rs.1,44,445/- is concerned. I find that the same has been filed only after due date prescribed in the Act for submission of revised return and for the detailed reasons recorded by the AO in his assessment order I hold AO fully justified in rejecting the revised computation Moreover, from the material available on record I also find that the assessee had not declared the cash deposits in ICICI Bank which he admitted subsequently only after it was detected by the AO. So far as, cash deposits amounting to Rs.21,53,230/- is concerned the assessee's claim that he failed to disclose above cash deposits in his return of income due to oversight/mistake is not convincing at all as no man of average prudence would ever forget such huge transactions in his bank account that too on number of occasions Moreover, as per established law the onus was on the assessee to establish the nature, source and genuineness of cash deposits in his bank account which he has completely failed to discharge. In this regard, even in the appellate proceedings, the assessee has failed to establish the nature, source and genuineness of above cash deposits by casually claiming that these are business receipts without any single piece of reliable evidence. From above, I am in complete agreement with AO's findings that the appellant's 6 Madan Singh Bisht claim that these cash deposits in ICICI Bank account and other two bank accounts were business receipts appear to be an afterthought and cooked up story which deserve to be rejected. From above, I find that the assessee for no valid reasons has been making conflicting claim from time to time without bringing on record definite and reliable piece of evidence in support of above claim and thus AO was justified in rejecting the assessee's submission in this regard. No detail of retail trading that is purchase sale stock etc. has been furnished by the assessee before the AO or even before me during the appellate proceedings. I also find that the AO has .given more than sufficient time and opportunity to the assessee to explain the nature, source and genuineness of cash deposits in ICICI Bank and other two bank account but the assessee has failed to discharge his Onus and. therefore, I hold AO fully justified in treating the cash deposits in ICICI Bank, Vijaya Bank and Canara Bank as unexplained The appellant vide his submission has merely repeated what he had said before the AO during assessment proceeding and no new facts or evidence whatsoever has been furnished by the appellant in the appellate proceedings. I also find that while passing assessment order the AC has considered the contention of the assessee very carefully and has offered his definite findings to establish the cash deposits as unexplained against which the appellant has not come out with any reliable material to rebut AO's findings. Taking all the above into consideration I find AO justified in treating cash deposits of Rs.24,14,049/- as unexplained money in assessee's hand and the 7 Madan Singh Bisht appellant's offer, for taxing Rs,1,44,445/- as business income taking the shelter of provision of Section 44AF was rightly rejected by AO.”

In his rival submissions the ld. DR strongly supported the orders of the authorities below.

I have considered the submissions of both the parties and perused the material available on the record. In the present case, it appears that the AO added the entire deposits made by 8 Madan Singh Bisht the assessee in his bank accounts. He has not given any set off for the withdrawals which were re-deposited in the bank accounts. It was also not brought on record that the withdrawals were used by the assessee elsewhere and not deposited in his bank accounts. In my opinion, in such type of cases, if the addition is to be made that can be made only of the peak credit and not of the entire deposits. In that view of the matter, the impugned order is set aside and AO is directed to make the addition only of the peak credit in the various bank accounts. The AO is also directed to allow reasonable and proper opportunity of being heard to the assessee while deciding the case.