Facts of the Case

The assessee was subjected to scrutiny assessment during which the Assessing Officer observed substantial cash deposits in the bank account. Treating the deposits as unexplained, the Assessing Officer made additions to income under the relevant provisions of the Income-tax Act.

The assessee contended that the deposits represented business receipts and other explained sources, supported by books of account and related records. However, the explanation was not accepted by the Assessing Officer, and additions were sustained by the first appellate authority.

Issues Involved

Whether additions on account of bank cash deposits can be sustained without proper investigation into the nature and source of such deposits.

Petitioner’s (Assessee’s) Arguments

  • The deposits were from disclosed business activities and recorded in the books of account.
  • The Assessing Officer failed to examine relevant evidence and explanations.
  • No independent inquiry was conducted to disprove the assessee’s claim.
  • Additions were made merely on suspicion without establishing that the deposits represented undisclosed income.

Respondent’s (Revenue’s) Arguments

  • The assessee failed to satisfactorily establish the source of cash deposits.
  • In absence of conclusive proof, the Assessing Officer was justified in treating the deposits as unexplained income.
  • The assessment order was based on available material on record.

Court Order / Findings (ITAT Decision)

  • Additions relating to cash deposits must be supported by proper inquiry and objective evaluation of evidence.
  • Where the assessee provides explanations supported by records, the Assessing Officer must conduct verification before rejecting them.
  • Mere disbelief or suspicion cannot justify treating deposits as unexplained income.

Important Clarification

  • Burden of proof initially lies on the assessee to explain the source of deposits.
  • Once a plausible explanation with supporting material is furnished, the onus shifts to the Revenue to disprove it.
  • Additions cannot be sustained solely on the basis of conjecture or inadequate investigation.

Link to download the order - https://itat.gov.in/public/files/upload/1611219193-69%20Mahavir%20Pd.%20Satish%20Chandra.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.