The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) directed the Assessing Officer (AO) to consider bank withdrawals while reassessing the unexplained cash deposits totaling Rs. 3.13 crore.
Prakash Govindbhai Patel,the appellant-assessee,filed his original Return of Income(ROI) on March 30, 2012, declaring a total income of Rs. 3,02,200/-. This return was processed under Section 143(1) of the Act on June 16, 2012, without any adjustments. His audited accounts for his proprietary businesses, Prince Creation and Sonal Creation, showed a turnover of Rs. 1,83,59,020/-. However, on March 17, 2017, the Deputy Director of Income Tax (Investigation) provided information regarding significant cash deposits in various bank accounts linked to him and his businesses.
The Assessing Officer(AO) noted that the declared income for assessment years 2010-11 to 2014-15 was disproportionately low compared to the large cash deposits made during this period. Despite repeated attempts to contact the assessee and his family, there was no response. Consequently, a notice under Section 144 was issued, and the assessment was finalized ex parte, adding unexplained cash deposits of Rs. 3,13,34,845/- to his total income.
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In the appeal, the Commissioner of Income Tax(Appeals)[CIT(A)] issued several notices, but the assessee did not respond. The assessee argued that the AO incorrectly applied Section 69A by adding bank credits without considering debits. Additional evidence submitted by the assessee was mostly bank statements already reviewed during the assessment.
The CIT(A) observed that the assessee remained non-compliant throughout the proceedings and upheld the addition of Rs. 3,13,34,845/- under Section 69A. The appeal was dismissed as the assessee failed to provide a valid explanation for the unexplained cash credits.
The assessee repeatedly sought adjournments but showed no intention of appearing or presenting the case. Despite being given a “last opportunity,” the assessee failed to attend the hearing or file an adjournment application, leading the tribunal to decide the case on merits.
The tribunal noted that the assessee made substantial cash deposits, which were inconsistent with the low income declared. Throughout the proceedings, the assessee remained uncooperative and did not provide any explanation for the cash deposits.
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Referring to various judicial precedents, such as Sadiq Sheikh v. Commissioner of Income Tax and Sunil Thomas v. ITO, the tribunal highlighted that establishing the identity of creditors or donors alone is insufficient; their creditworthiness must also be proven. The rulings emphasized that the burden of proving the legitimacy of such transactions rests on the assessee.
The assessee also requested consideration of withdrawals from the bank accounts. The bench directed the AO to account for these withdrawals when determining the final income.
The two member bench comprising Siddhartha Nautiyal (Judicial Member) and Makarand V.Mahadeokar(Accountant Member) partly allowed the appeal of the assessee.
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