The Hyderabad bench of the Income Tax Appellate Tribunal (ITAT) held that an addition under Section 68 of the Income Tax Act, 1961 cannot be made in the absence of the source to use the cash deposited in the bank by the NRI.
The assessee is a non-resident of individual who has not filed the return of income. The assessment in the case was reopened based on the information received from I and CI Wing with the prior approval of CIT(IT&TP), Hyderabad. The notices under Section 142(1) of the Income Tax Act were issued to the assessee calling for information.
However, there was no response from the assessee for the notices issued. Thereafter, a show cause notice was issued to the assessee for which assessee has submitted information stating that the immovable property was purchased in Representative Capacity but not individual capacity for M/s Venpion Energy Systems Corporation (India) Private Limited and submitted the copy of sale deed.
The verification of the bank statement and information furnished by the assessee, the explanation offered by the assessee found not acceptable. As the assessee failed to disclose the cash deposits to the tune of Rs.36,27,000/-, the same was added as Unexplained Cash credits in the hands of assessee as per provisions of Section 68 of the Income Tax Act.
Since, the assessee failed to disclose the cash deposits, the penalty under Section 271 (i)(c) of the Income Tax Act was separately initiated for concealment of income and passed the draft assessment order.
The Authorized Representative submitted that the assessee and her husband were having the bank accounts and that during the Financial Years 2010-11 to 2012-13, her husband has withdrawn Rs.34,14,510/-, Rs.67,65,000/- and 44,77,000/- respectively. It is the contention of the ld. AR that the Revenue had accepted the cash deposits made by the husband of the assessee to an extent of Rs.43,78,500/- in F.Y. 2012-13.
It was further submitted that once the availability of the cash was accepted in the hands of the husband of assessee, out of total cash of Rs.1,46,56,510/- based on earlier cash withdrawals from the bank accounts, then it is not permissible for the Revenue to deny the availability of cash out of the said cash withdrawal in the hands of the wife / assessee before us.
The Two-member bench comprising of Rama Kanta Panda (Vice-President) and Laliet Kumar (Judicial member) held that once the assessee is able to demonstrate the withdrawal of cash by clinching and unrebutted evidence, then the same should have been accepted.
The Revenue has not brought out any evidence to the contrary to show that the cash withdrawals during the earlier assessment years were used for the purposes of other activities by the assessee or her husband.
Moreover, when the assessee happens to be an NRI, and does not have any source of income or activity for which the cash can be utilized. Therefore, the bench do not find any reason to make the addition in the hands of the assessee. Accordingly, the addition was deleted and appeal of the assessee was allowed.
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