The Income Tax Appellate Tribunal (ITAT), Ahmedabad bench, while deleting the addition made by the Assessing Officer (AO), held that the AO failed to conduct an independent inquiry in respect of the deposit in the bank account of the assessee for the issuance of a demand draft in favor of Indian Oil Corporation.
Rajesh Singh A. Rajput, the assessee, is an individual deriving income from salary. In the return filed under section 139 of the Act, the assessee declared income at Rs. 1.76 lakh, which was subsequently selected for scrutiny under CASS.
During the assessment proceedings, the AO noticed that the savings bank account of the assessee held with Axis Bank had been credited by an amount aggregating to Rs. 52,39,433, only in the form of cash and cheque deposits. The assessee was asked to furnish the nature and sources of credit in the bank account, but the assessee failed to provide any reply. Thus, in the absence of a reply from the assessee, the AO treated the entire deposit of Rs. 52,39,433 as unexplained cash credit and added the same to the total income of the assessee.
Aggrieved by the order, the assessee filed an appeal before the CIT(A). During the proceedings, S.N. Divatia, counsel for the assessee, submitted that the cash amounting to Rs. 21,71,000 was deposited by M/s Deep Enterprises, a proprietary concern of his friend who was ill at that time and unable to handle banking activity due to illness. However, his friend needed to issue a demand draft in favor of Indian Oil Corporation against the purchases of petroleum products by M/s Deep Enterprises. Accordingly, the cash of M/s Deep Enterprises was deposited in his bank account, and he issued a demand draft in favor of Indian Oil Corporation (IOC). CIT(A), after considering the submission, confirmed the addition. Thereafter, the assessee filed a second appeal before the Tribunal.
During the proceedings, S.N. Divatia, the assessee representative, argued that the majority amount of Rs. 21,71,000 was cash received from M/s Deep Enterprises, which was deposited in his bank account for the issuance of a demand draft in favor of Indian Oil Corporation. The assessee also submitted all records and evidence substantiating his claim. Saumya Pandey, Counsel for Revenue, supported the decision of the lower authorities.
The tribunal observed that rejecting the explanation of the assessee merely for a minor difference in the invoice amount and demand draft viz-a-viz cash deposit is not justified. The AO did not make any independent inquiry regarding the deposit in the bank account for the issuance of the Demand Draft in favor of Indian Oil Corporation. After reviewing the facts and records, the two-member bench of Waseem Ahmed (Accountant Member) and Ms. Madhumita Roy (Judicial Member) deleted the addition made by the assessing officer in respect of the cash deposit due to the failure to make an independent inquiry.
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