Addition u/s 68 based on Cash Deposit not allowable in the Absence of Corroborative Evidence: ITAT [Read Order]

The Pune bench of the Income Tax Appellate Tribunal(ITAT) has held that addition under section  68 of the Income Tax Act,1961 based on Cash deposit is not allowable  in the absence of the Corroborative  evidence

Prashant Pratap Ahir, the assessee submitted that the impugned addition and confirmation thereof by the CIT(A) was on account of misrepresentation by the engaged representative, whereas the amount of cash deposit was out of on-money (cash) generated on the sale of capital asset and the gain arisen therefrom was declared as income in the ITR filed which was accepted by the AO, for the reason the cash deposits be treated as an integral part of sale consideration received and be charged to tax as a capital gain instead of unexplained cash credit.

The department stated that the appellant tooka chameleon stance one after another to substantiate the cash deposits, which de-facto needs no consideration, as the addition u/s 68 was carried out after due verification of record and in the event of failure to substantiate the borrowings made, and for the reason, the order of the tax authorities below deserves to be confirmed.  

It was observed that the appellant fell into the non-filer category as per the database of Revenue, consequently in the evince of substantial financial transactions undertaken including cash deposits into a savings bank account exceeding ₹10Lakhs and in the absence of return of income on record, the case of the appellant was subjected to 147 proceedings and upon failure to substantiate the claim of borrowings put forth in support of cash deposits made, the impugned addition was triggered.

The appellant’s fresh and altered claim that the cash deposits are out of on-money cash was generated on the sale of capital asset and was an integral part of the sale transaction can be traced back to the date of sale of capital asset undertaken in the month of November 2012 and the corresponding cash deposits into saving bank account in the immediately succeeding month of December 2012.

Per contra, the Revenue failed to bring on record any deprecative material in rebutting the present claim of the appellant. A Coram of Shri S S Viswanethra Ravi, Judicial Member and Shri G D Padmahshali, Accountant Member observed that the material facts strongly indicate a probability that, the appellant had occasioned to receive on-money (cash) in the sale transaction of a capital asset, and another very strong probable factor is that the said cash was deposited into bank account after the occurrence of the sale transaction.

It was viewed that once nothing has been proved against the appellant with aid of any direct material especially when three rounds of investigation have been carried out, then nothing can be implicated against the appellant.

While allowing the appeal of the assessee for statistical purposes, the Tribunal set aside the order of both the tax authorities below, and direct the AO to treat the said cash deposits as an integral part of the sale consideration received and re frame the assessment in the light of chapter IV-E of the Act.

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