Facts of the Case

During assessment proceedings, the Assessing Officer noticed substantial cash deposits and financial transactions in the assessee’s bank account. The assessee was called upon to explain the nature and source of these deposits.

The Assessing Officer found the explanation and supporting evidence insufficient and treated the amounts as unexplained income under the relevant provisions of the Income-tax Act. Additions were accordingly made to the taxable income.

Aggrieved by the assessment order, the assessee pursued appellate remedies.

Issues Involved

  1. Whether the cash deposits and credits were satisfactorily explained.
  2. Whether the Assessing Officer was justified in treating the amounts as unexplained income.
  3. Whether the assessee discharged the burden of proof required under law.

Petitioner’s (Assessee’s) Arguments

  • The assessee contended that the deposits represented legitimate funds and not undisclosed income.
  • It was argued that the Assessing Officer did not properly appreciate the explanation furnished.
  • The assessee sought deletion of the additions, asserting that the transactions had genuine sources.

Respondent’s (Revenue’s) Arguments

  • The Revenue argued that the assessee failed to produce credible documentary evidence to substantiate the claimed sources of deposits.
  • Mere explanations without verifiable proof were insufficient to discharge the statutory burden.
  • Therefore, the additions made by the Assessing Officer were justified.

Court Order / Findings (ITAT)

  • The burden lies on the assessee to establish the identity, nature, and source of funds deposited in bank accounts.
  • In the absence of reliable supporting evidence, the Assessing Officer is entitled to treat such deposits as unexplained income.
  • Additions based on unexplained cash deposits are sustainable where the assessee fails to provide satisfactory explanation.

Important Clarification

Unexplained cash deposits or credits may be taxed as income when the assessee fails to substantiate their source with credible evidence.

  • Cases involving unaccounted cash transactions
  • Documentation standards during assessment proceedings
  • Burden of proof in unexplained income matters

Separate Link (as provided)

 

Link to download the order –https://itat.gov.in/public/files/upload/1606480880-Anil.pdf

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