The Hyderabad bench of the Income Tax Appellate Tribunal (ITAT) deleted the additions on unexplained cash deposits under Sections 69A and 68 of Income Tax Act, 1961 upon receipt of proper explanation by assessee.
The assessee, Sri Siva Prasad Nidamarthy who is the Managing Director of M/s. Lampex Electronics Ltd., Hyderabad, filed a return of income for the year 2014-15 after receiving a notice under Section 148 of the Income Tax Act, 1961 declaring an income of Rs. 17,01,920/-.
During assessment proceedings, the Assessing Officer found that Rs. 6,39,42,000/- was deposited in two bank branches, and the assessee explained only Rs. 5,38,89,000/- of it, leaving Rs. 1,00,53,000/- unexplained.
The Assessing Officer added this unexplained amount to the assessee’s income. Additionally, the Assessing Officer observed that Rs. 2.35 crores was deposited from M/s. Royal Home Constructions as Refundable Fidelity Guarantee, but the assessee did not provide copies of their accounts or tax returns. As M/s. Royal Home Constructions stopped filing tax returns, the assessing Officer added this amount to the assessee’s income as well.
Two additions are in question in this appeal. One is in respect of unexplained cash deposit of Rs. 1,00,53,000/- under Section 69A of the Income Tax Act and the other is Rs. 2.35 crores under Section 68 of the Income Tax Act.
In appeal, CIT(A) concluded that only a small amount of Rs. 5,21,199/- remains unexplained and the second addition should be deleted.
The Revenue filed an appeal against the decision of the CIT(A), while the assessee filed a cross-objection in support of the CIT(A)’s findings.
Counsel for the revenue argued that the CIT(A) failed to seek a remand report from the Assessing Officer and made errors in granting relief to the assessee, including an excess relief of Rs. 16,51,000/- and accepting agricultural income of Rs. 28.5 lakhs which was not included in the original assessment.
He further argued that the assessee failed to provide proof of identity and creditworthiness of a person who claimed to have given the assessee Rs. 11,84,400/-.
The counsel requested that the matter be restored to the file of the assessing Officer for verification.
Counsel for the assessee submitted that the assessee furnished all the bank account details to the assessing officer and also clarified the receipts of Rs. 28.5 lakhs and also Rs. 11,84,400/.
He further added, that the assessing officer simply brushed aside the submissions made by the assessee and without adverting to the contentions of the assessee in his explanation offered during the assessment proceedings.
In the assessment year 2015-16, there are three additions made by the assessing officer. These include Rs. 3.03 crores for refundable fidelity guarantee, Rs. 28.50 lakhs for agricultural income, and Rs. 5 lakhs for unexplained cash deposits.
For the first appeal, the decision was made based on the previous year’s assessment. For the second appeal, the Assessing Officer did not accept the proof provided by the assessee and claimed that the land was not owned by the assessee.
The CIT(A) found that the assessee had made an IDS declaration of Rs. 34.35 lakhs and declared agricultural income of Rs. 28.50 lakhs, which was accepted. For the third appeal, the CIT(A) found that the cash deposits were properly explained by cash withdrawals and therefore the addition was not reasonable.
The two-member tribunal bench consisting of Account Member, Rama Kanta panda and Judicial Member, K. Narasimha Chary observed that there was no denial of the deposits and withdrawals.
Further, such a fact was verified by the assessing officer also and admitted in the remand report. Both the appeals were dismissed and cross objections were allowed.
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