The Raipur bench of the Income Tax Appellate Tribunal ( ITAT ) has restored the case to the Assessing Officer ( AO ) for proper verification of the unexplained cash additions totaling Rs. 18.5 lakhs, which stem from the opening balance and unsecured loans.
The respondent/ assessee Rahul Kumar Jain, submitted a cash position chart indicating an opening cash balance of Rs. 18, 50,000 and a closing balance of Rs. 21, 42,333 in the original return filed on 31.03.2009. However, the Assessing Officer (AO) doubted the authenticity of this information. The AO noted that the assessee had acquired properties with a consideration exceeding taxable limits, yet the assessee claimed to have only started his business three years ago, with no prior income sources. The assessee argued that his income over the last three years was below the tax threshold, and thus, he had not filed Income Tax Returns (ITRs).
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Due to these questionable circumstances, the AO requested the assessee to provide supporting documents for the filed ITR, including the trading account, Profit and Loss Account, Capital Account, Balance Sheet, and a list of creditors and debtors. The assessee failed to provide these documents, claiming he did not maintain books of accounts. The list of creditors and debtors provided later lacked postal addresses, despite specific instructions from the AO. This led the AO to conclude that the assessee did not assist in verifying the creditors and debtors.
The AO found the assessee’s contentions ambiguous and incomplete, particularly regarding the alleged will from the assessee’s grandmother. The AO noted that it was unclear whether the will was executed during her lifetime and whether the assets were physically delivered as per the will, as no copy of the will was filed. The AO also questioned the grandmother’s creditworthiness and the receipt of cash, gold, and silver by the assessee due to a lack of corroborative evidence, leading to the addition.
Mr. Satya Prakash Sharma, representing the revenue, supported the AO’s observations, arguing that the addition was justified and should be upheld, while the order of the Commissioner of Income Tax (Appeals) [CIT (A)] should be set aside.
Conversely, Mr. S. R. Rao, representing the assessee, argued that the assessee received certain funds from his grandmother through her will, and a copy of the will was included in the assessee’s paper book. He also noted that the assessee received gold and silver, for which no addition was proposed by the AO. He further explained that the CIT (A) rightly acknowledged the financial background of the assessee’s grandmother, who was from a well-off Marwadi Jain family, and thus, doubting the availability of cash, gold, and silver with her was unjustified. Rao contended that the AO was not justified in expecting the assessee to prove the physical delivery of such assets.
Upon review, the bench noted that the will of the grandmother did not clearly quantify the cash, gold, or silver and lacked supporting evidence for the transfer of these assets to the assessee. Thus, while the assessee’s claim of receiving these assets could not be out rightly rejected, it required verification through corroborative evidence. Similarly, funds received by the assessee from 28 sundry creditors, listed in the assessee’s paper book, needed to be verified for the identity, creditworthiness, and genuineness of the transactions as required under Section 68.
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The assessee also claimed to have received an unsecured loan of Rs. 5 lakh from his father through Rajkumar Modi, with confirmation placed in the paper book. However, since this fact was not presented before the AO and was accepted by the CIT (A) without the AO’s input, it also required verification. The bench observed that the assessee failed to substantiate the opening cash balance of Rs. 18,50,000 before the AO, yet it was accepted by the CIT(A) without proper verification.
Given these observations, the bench determined that the issue should be remanded to the AO for further verification of the facts and contentions raised by the assessee, based on corroborative evidence. The tribunal, comprising Ravish Sood (Judicial Member) and Arun Khodpia, (Accountant Member) directed the AO to conduct necessary inquiries and provide the assessee with a reasonable opportunity to present evidence and produce the trade and loan creditors. The AO is instructed to adjudicate the matter afresh, following the law’s mandate, if the assessee fails to substantiate his claims
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