Facts of the Case

The assessee, Waseem Ahmad, was subjected to assessment proceedings during which the Assessing Officer noticed substantial cash deposits in the bank account of the assessee. The assessee was required to explain the source of these deposits.

Not being fully satisfied with the explanation furnished, the Assessing Officer treated the deposits as unexplained income and made additions to the total income of the assessee. The Commissioner of Income Tax (Appeals) confirmed the additions.

Aggrieved by the appellate order, the assessee filed an appeal before the Income Tax Appellate Tribunal, Allahabad.

Issues Involved

  1. Whether the cash deposits in the bank account constituted unexplained income.
  2. Whether the assessee had satisfactorily explained the source of such deposits.
  3. Whether the additions made by the Assessing Officer were justified in law.

Petitioner’s Arguments (Assessee)

  • The cash deposits were from explained sources and did not represent undisclosed income.
  • The Assessing Officer failed to properly consider the explanations and evidence submitted.
  • Additions were made on presumptions rather than concrete material.
  • The order of the CIT(A) confirming the additions was erroneous.

Respondent’s Arguments (Revenue)

  • The assessee failed to produce satisfactory evidence regarding the source of deposits.
  • The unexplained nature of deposits justified their taxation as income.
  • The additions were made in accordance with statutory provisions.
  • The orders of the lower authorities should be upheld.

Court Order / Findings (ITAT)

The Tribunal examined the material on record and held that additions for unexplained cash deposits must be supported by proper analysis of facts and evidence.

It observed that where the assessee furnishes a reasonable explanation supported by material, the entire deposits cannot be treated as income without further verification. The Tribunal found that the Assessing Officer had not adequately evaluated the explanations provided.

Accordingly, the Tribunal granted relief to the assessee by modifying or deleting the additions to the extent found unjustified.

Important Clarification

The decision reiterates the following principles:

  • Cash deposits cannot automatically be treated as income without inquiry into source.
  • The burden initially lies on the assessee to explain the deposits.
  • Once plausible explanation is given, the Revenue must disprove it with evidence.
  • Additions under Sections 68/69A must be based on facts, not suspicion.

Link to download the order - 

https://itat.gov.in/public/files/upload/1672729542-Waseem%20Ahmad%20PDF.pdf

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