Addition confirmed by High Court as assessee failed to rebut presumption drawn u/s 68 rws 69A
In a recent judgment, Hon’ble Chhattisgarh High Court confirmed the addition for cash deposit in bank account as AO, CIT(A) and ITAT gave concurrent finding that the assessee did not produce any evidence to rebut the presumption drawn under Section 68 read with Section 69A of the Income Tax Act, 1961.
ABCAUS Case Law Citation:
4313 (2024) (11) abcaus.in HC
Case laws relied upon by the Parties:
Harjindar Singh Bal, Durg Vs. Income Tax Officer
Commissioner of Income Tax Vs. Bhaichand H. Gandhi (1983) 141 ITR 67 (Bom.)
M/s. D.N Singh Vs. Commissioner of Income Tax
Commissioner of Income Tax Vs. Smt. P.K Noorjahan (1999) 103 Taxman 382 (SC)
Commissioner of Income Tax Vs. H.R. Karandikar & Ors. (1981) 6 Taxman 242 (Bom.)
In the instant case, the appellant assessee had challenged the order of the ITAT confirming the addition u/s 68 read with section 69A the Income Tax Act, 1961 (the Act) for cash deposit in the savings bank account.https://abcaus.in/tag/cash-deposit-in-bank
The AO based on the AIR information that though the assessee during the relevant Assessment Year had made cash deposits of more than Rs.10,00,000/- in his savings bank account with State Bank of India but had not filed his return of income, initiated proceedings u/s. 147 of the Act. Notice u/s 148 of the Act was issued to the assessee by registered post. Further notice under Section 142(1) was also served to him fixing the date of hearing which the assessee did not respond leading to extending of last opportunity on two occasions. However, the notices remained uncompiled with by the assessee.
A memo was issued to him to show cause why assessment be not completed ex parte under Section 144 of the Act as per the information and documents available on record which was served to him, but it also remained unanswered and again it was not responded by the assessee.
The Assessing Officer called information under Section 133(6) from the Manager, State Bank of India and in response to which the Bank had submitted copy of the statement of the bank account of the assessee.
The bank statement revealed that the assessee had made large amount of cash deposits in his Savings Bank Account and in that case, onus was lying with the assessee to substantiate his case with evidence regarding source of income for making cash deposits in the said bank account.
Since the assessee failed to participate in the assessment proceedings and furnished no explanation and also failed to explain the source of above cash deposit, the assessment was completed ex parte under Section 144 of the Act and the cash deposited was treated as the assessee’s undisclosed and unexplained income and it was added to the total income of the assessee under Section 68 read with Section 69A of the Act.
Feeling aggrieved against the order of the Assessing Officer the appellant/assessee preferred an appeal before the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) whereupon the assessee was issued notice on his registered e-mail address to submit written submission, but the appellant despite of four notices.
As a result, CIT (Appeals), NFAC, dismissed the appeal holding that the assessee failed to substantiate his claim and did not furnish documentary evidence / written submission explaining the nature and source of the cash deposits in his bank account, and further held that the documents filed by him to support his explanation did not inspire confidence.
Before the Tribunal the assessee filed additional evidence namely a certificate from employer NBFC and secondly copy of affidavits of five borrowers of said NBFC Limited on illustrative basis confirming collection of EMI by the assessee.
It was the claim of the assessee that the cash deposited in his bank account were EMI/Loan instaments collected by him as an agent-employee of the NBFC, from the borrowers of the said company. It was submitted that the loan installments collected by the assessee from the borrowers were deposited by him in his bank account, which amounts would thereafter be withdrawn and passed over to the employer NBFC company.
It was submitted that as the borrowers were residing in remote locations i.e naxal affected regions, therefore, the assesee could not carry the cash collections and would deposit the same in his bank account.
The attention was drawn to the “affidavits” of five borrowers and certificate of NBFC wherein it was affirmed that the amount in question was collected by the assessee as a recovery agent from its borrowers who were located in naxal affected areas. It is further certified that the aforesaid amount of EMI’s collected by the assessee were deposited by the assessee in his bank account and thereafter were withdrawn and paid to the company.
In view of the above, the assessee submitted that as he had duly explained the nature and source of the cash deposits in his bank account, therefore, there was no justification for addition of any part of the same u/s 68/69A of the Act.
The Tribunal observed that a perusal of the bank account revealed that while for the registered office of the NBFC company was situated at Chhattisgarh, but the cash withdrawals from the aforementioned bank account on majority of occasions were made at ATM’s at Madhya Pradesh. Secondly, apart from that, the small amount of ATM withdrawals spread over the year from the bank account of the assessee did not inspire any confidence as regards his claim that the same were in the nature of withdrawals for passing over the respective amounts of EMI’s/Installments collected from the borrowers to the employer company, and thirdly though it was the assessee claim that he had collected the EMI’s/Installments from the borrowers located in remote naxal affected areas and on his own deposited the said amounts in his bank account, but the five borrowers in their respective “affidavits” had stated that the amount of EMI’s/Installments were deposited by them in the bank account of the assessee and receipts in lieu thereof would be issued to them.
The Tribunal opined that as assessee had failed to substantiate based on documentary evidence the nature and source of the cash deposits in his bank account and the documents filed by him to support his explanation did not inspire any confidence, there was no reason to dislodge the addition made/sustained by the lower authorities. Thus, the Grounds of appeal raised by the assessee were dismissed by the Tribunal.
Aggrieved, the asssessee challenged the order of the ITAT before the Hon’ble High Court and submitted that the findings of the Assessing Officer, CIT (Appeals) and ITAT were perverse and all the authorities had erred in upholding addition under Section 68 read with Section 69A
of the Act in absence of books of account being maintained by the assessee specifically when there was no statutory obligation on the appellant / assessee to maintain books of account as per Section 44AA of the Act and further erred in upholding addition under Section 68 read with Section 69A as the parameters to make addition under the aforesaid provisions are different / as the condition(s) to attract addition under the aforesaid provisions are different. As such, substantial question of law arises for consideration in this appeal.
The Hon’ble High Court noted the repeated non-cooperation of the assessee before the lower authorities. It was observed that Hon’ble Supreme Court had considered the nature and scope of Section 68 of the IT Act and laid down when and in what circumstances Section 68 of the Act would come into play. The Apex Court held that that Section 68 suggests that there has to be credit of amounts in the books maintained by an assessees; such credit has to be of a sum during the previous year; and the assessees offer no explanation about the nature and source of such credit found in the books; or the explanation offered by the assessees in the opinion of the Assessing Officer is not satisfactory, it is only then the sum so credited may be charged to income-tax as the income of the assessees of that previous year. The expression “the assessee offers no explanation” means where the assessees offer no proper, reasonable and acceptable explanation. The opinion of the Assessing Officer for not accepting the explanation offered by the assessees as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on record.
The Hon’ble High Court further observed that the Hon’ble Supreme Court while dealing with Section 69A of the Act has held that in order to find out whether the assessee is the owner of any money or valuable article for the purposes of Section 69-A of the Income Tax Act, 1961, the principle of common law jurisprudence embodied in Section 110 of the Evidence Act can be applied. The expression ‘income’ as used in Section 69-A of the Income Tax Act, has wide meaning which meant anything which came in or resulted in gain.
The Hon’ble High Court also observed that the Hon’ble Supreme Court had held that where a deposit stands in the name of a third person and where that person is related to the assessee then in such a case the proper course would be to call upon the person in whose books the deposit appears or the person in whose name the deposit stands should be called upon to explain such deposit and further held that the onus of proving the source of deposit primarily rested on the persons in whose names the deposit appeared in various banks.
The Hon’ble High Court noted that where the lower authorities as also the High Court had concurrently found that the assessee did not produce any evidence to rebut the presumption drawn against him under Section 68 of the Act, in the absence of any cogent evidence and finding the explanation furnished by the assessee not satisfactory, their Lordships of the Supreme Court held that the concurrent finding of the lower authorities would not give rise to a substantial question of law.
The Hon’ble High Court found that the explanation of the assessee and the affidavit, had not been found to be the reasonable explanation and the ITAT came to the conclusion that the assessee had failed to substantiate the nature and source of the cash deposits in his bank account. The Assessing Officer; the CIT (Appeals), NFAC; and the ITAT, all, concurrently and correctly concluded that the assessee did not produce any evidence to rebut the presumption drawn under Section 68 read with Section 69A of the Act.
In the light of the decision of the Supreme Court, the Hon’ble High Court opined that the finding of the ITAT was the correct finding of fact based on record and the appellant had failed to demonstrate any substantial question of law in this appeal and as such, no substantial question of law arises from the order of the ITAT
Accordingly, the appeal was dismissed.
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