Credit Entries in Saving Account Cannot be treated as Unexplained Cash Credit u/s 68 of Income Tax Act: ITAT quashes Reassessment Proceedings initiated based on Conjectures and Surmises [Read Order]

The Income Tax Appellate Tribunal (ITAT), Delhi bench held that credit entries in the savings account in a bank could not be treated as unexplained cash credit under Section 68 of the Income Tax Act, 1961.

Therefore, the bench quashed the reassessment proceedings initiated based on conjectures and surmises.

The assessee, Vikas Arora, a non-resident individual, after filing the return of income, had their case selected for scrutiny. The Assessing Officer then learned that the assessee's bank account had been credited with Rs. 3,68,15,167 during the relevant financial year for the assessment year in question, and this sum had not been included in the income return.

In accordance with Section 147 of the Income Tax Act, the Assessing Officer reopened the assessment. Following the notification given under Section 148 of the Act, the assessee submitted their income return, stating that they earned Rs. 10,15,790.

The assessing officer asked the assessee to provide an explanation for the source of the funds credited to the bank account. The assessee provided a statement in which they explained that the funds deposited into the bank account are the proceeds from the sale of property.

Finally, the Assessing Officer concluded the assessment and held that the assessee did not furnish any documentary evidence to substantiate their claim. Therefore, the Assessing Officer treated the amount as unexplained cash credit under Section 68 of the Act and added it back to the income of the assessee.

Aggrieved by the order, the assessee filed an appeal before the CIT(A), who allowed the appeal filed by the assessee and observed that the assessee had considered the credit entries appearing in the bank statements and had also offered an explanation regarding the source of such credit entries. Thus, the credit entries could not be treated as unexplained cash credit under Section 68 of the Income Tax Act.

Aggrieved by the order, the revenue filed a second appeal before the tribunal.

The tribunal observed that the assessee voluntarily disclosed the transaction that appeared in the bank account when filing their income return. Nevertheless, the Assessing Officer reopened the assessment based only on information obtained from the Investigation Wing, completely unaware that the assessee had filed their income return. Therefore, the reopening of the assessment appears to be without proper application of mind and based on conjectures and surmises.

Moreover, the assessee furnished the necessary details explaining the source of the credit entries. Without properly examining the materials brought on record, the Assessing Officer made the addition.

After reviewing the facts and records, the two-member bench of Dr. B.R.R. Kumar (Judicial Member) and Saktijit Dey (Vice-President) quashed the reassessment proceedings and held that credit entries in the savings account in a bank could not be treated as unexplained cash credit under Section 68 of the Income Tax Act. Therefore, the bench deleted the addition made by the Assessing Officer and allowed the appeal of the assessee.

Rajeev Ahuja, counsel, appeared for the assessee, and Sanjay Kumar, counsel, appeared for the revenue.

To Read the full text of the Order CLICK HERE

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