Facts of the Case

The assessee, an individual, filed his return of income for the relevant assessment year. During assessment proceedings, the Assessing Officer noticed substantial cash deposits in the assessee’s bank account. In the absence of satisfactory explanation and supporting evidence, the deposits were treated as unexplained money and added to the income under the provisions of the Income-tax Act.

The assessment resulted in a significant increase in assessed income compared to the returned income. The Commissioner of Income Tax (Appeals) upheld the action of the Assessing Officer, leading the assessee to file an appeal before the Income Tax Appellate Tribunal.

Issues Involved

  1. Whether the addition of cash deposits as unexplained money under Section 69A was justified.
  2. Whether the explanation furnished by the assessee regarding the source of deposits was properly considered.
  3. Whether the assessment order suffered from lack of adequate inquiry or verification.

Petitioner’s (Assessee’s) Arguments

  • The cash deposits were made out of explained sources and did not constitute undisclosed income.
  • The Assessing Officer failed to properly consider the explanation and circumstances of the assessee.
  • The addition was arbitrary and excessive relative to the actual income.
  • Supporting facts and explanations were ignored by the lower authorities.

Respondent’s (Revenue’s) Arguments

  • The assessee did not produce sufficient documentary evidence to substantiate the source of cash deposits.
  • In the absence of credible proof, the Assessing Officer was justified in treating the deposits as unexplained.
  • The order of the Commissioner (Appeals) confirming the addition was legally valid and should be upheld.

Court / Tribunal Findings & Order

The Tribunal examined the material available on record and the rival submissions. It observed that while unexplained cash deposits can be taxed under Section 69A, such additions must be based on proper appreciation of facts and evidence.

The Tribunal found that certain aspects of the assessee’s explanation required consideration and that the addition could not be sustained to the full extent without adequate inquiry. Accordingly, appropriate relief was granted to the assessee in accordance with law.

Important Clarification by the Tribunal

  • Addition under Section 69A cannot be made solely on suspicion without proper examination of facts.
  • Authorities must consider the explanation offered by the assessee objectively.
  • The burden of proof lies on the assessee, but the assessment must still be fair and reasonable.

Link to download the order –

https://itat.gov.in/public/files/upload/1607059399-Bachanu%20Ram%20pdf.pdf

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