Principles governing Cash Credit cannot be extended to Unexplained Investments: Telangana High Court [Read Order]

The Telangana High Court has held that principles governing cash credit cannot be extended to unexplained investments.

The appellant, Kishan Kothwal submitted that he had deposited only Rs.10 lakhs during the demonetization period and not Rs.13,16,304.00). Verification of the bank account statement showed the deposit of cash of Rs.10 lakhs on 12.11.2016 in addition to certain other deposits in tranches. Regarding cash deposit of Rs.10 lakhs, according to the assessee, the same was out of 1/3rd salary savings from his salary since 2006 and also 1/3rd savings of his son since 2011. This explanation was not accepted by the Assessing Officer on the ground that it was difficult to believe that such savings were kept at home over so many years. In addition, a further sum of Rs.2.75 lakhs was also found to be unexplained. Therefore, the Assessing Officer added a sum of Rs.12,75,000.00 to the returned income of the assessee as unexplained deposits in bank account, considering the same as income under Section 69A of the Act.

In appeal before the Commissioner of Income Tax (Appeals)-7, Hyderabad (for short, 'CIT (A)' hereinafter), the Appellate Authority recorded the statement of the assessee under Section 131 of the Act in the presence of his authorised representative. It was noted that assessee is a State Government employee and he was required to inform the State Government in the event of making any investment in speculative transaction. While granting relief to the extent of Rs.2.75 lakhs, which was stated to be on account of withdrawal from his GPF, the first Appellate Authority confirmed the addition of Rs.10 lakhs made by the Assessing Officer.

The division bench of Justice Ujjal Bhuyan and Justice P.Madhavi Devi has held that the parameters for making addition under Section 68 of the Act and under Section 69A of the Act, though may appear to be similar, however, is not so; therefore, addition of cash credit under Section 68 of the Act would stand on a different pedestal. The principles governing cash credit under Section 68 of the Act cannot be extended to unexplained investments under Section 69A of the Act.

Kishan Kothwal, 10-4-466, Nasarpura, Siddipet, Medak, Telangana- 502103 VS lncome Tax Officer, Ward- 1 , Siddipet, Medak.

CITATION: 2022 TAXSCAN (HC) 162

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