Unexplained Cash Deposits in Bank: ITAT Restricts Addition to 12% as Interest on Short-Term Loans [Read Order]
The tribunal noted that the Assessing Officer had not allowed set-off for withdrawals and should have considered the appellant’s claim of running a money-lending business.
The Jabalpur Bench of Income Tax Appellate Tribunal ( ITAT ) partly allowed the appeal, restricting the addition of unexplained cash deposits in bank to 12% of the total deposits as interest on short-term loans.
Dayanand Paryani,appellant-assessee, was found to have deposited Rs.29,38,600/- in his bank account during the financial year 2009-10, relevant to A.Y. 2010-11. The Assessing Officer (AO) noting that this income had escaped assessment, re-opened the case and issued a notice under section 148 of the Act, on 27.03.2017, served on 31.03.2017.
The assessee did not respond or file a return. Consequently, the Assessing Officer framed the assessment under section 144 read with section 147, adding the entire cash deposit to his income. The Commissioner of Income Tax (Appelas)[CIT(A)] upheld this addition, dismissing the appeal, following which the assessee approached the tribunal.
The assessee counsel argued that the AO did not allow set-off for amounts withdrawn and later redeposited, and that the addition should have been limited to the peak credit or at most the interest earned. He also mentioned that the appellant had suffered 85% disability from a bike accident, which prevented responding to the notices.
The Departmental counsel however, maintained that it was the appellant’s duty to prove that the deposits were from short-term loans, and without evidence, the lower authorities were justified in treating the entire credit as unexplained.
A single member bench of kul Bharat (Vice President) noted that the AO added the entire credits in the assessee’s bank account without allowing set-off for withdrawals. It observed that the AO should have considered the appellant’s explanation of running a money-lending business and computed the addition based on peak credit.
The tribunal directed that the addition be restricted to 12% of the total deposits, representing normal interest on short-term loans, and partly allowed the appeal.
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