Change in explanation of assesseee due to change of council cannot be summarily brushed aside – ITAT
In a recent judgment, the ITAT Raipur has held that the claim that explanation regarding the source of cash deposits in the assessee’s bank account as was advanced before the AO was tutored by his earlier counsel cannot be summarily brushed aside.
ABCAUS Case Law Citation:
ABCAUS 4062 (2024) (06) ITAT
In the instant case, the assessee had challenged the order passed by the National Faceless Appeal Center (NFAC), CIT(A) in in sustaining the order of the Assessing Officer (AO) making addition on account of cash deposited in the savings bank account and other credit as unexplained credit.
Based on the information available with the department that the assessee had during the subject year made large amount of cash deposits in his savings bank account, but had not filed his return of income, the A.O initiated proceedings u/s 147 of the Act. Notice u/s.148 of the Act was issued to the assessee.
It was submitted by the assessee that he was engaged in the chain system business of selling milk. Elaborating on the modality of the aforesaid business, it was submitted by the assessee that his job was to add certain members to the business chain. It was stated by him that as per the aforesaid chain system products were to be sold in local or other areas. Carrying his contention further, it was submitted that the cash deposits in his bank account were the parent’s company money, which as per the latter’s directions was to be paid by him to certain persons.
The assessee was called upon to place on record documentary evidence to substantiate the authenticity of his aforesaid claim by placing on record details of persons/company with whom he had done the business activities. However, assessee had failed to furnish any details regarding his business activities.
The A.O was of the view that considering the trend of cash deposits/withdrawals in the bank account the claim of the assessee that the same were sourced from his aforesaid business did not merit acceptance.
As a result, the AO made addition towards the cash deposits as unexplained cash credit u/s. 69 of the Act.
On first appeal, the CIT(Appeals)observed that the assessee had come forth with a new explanation as regards the nature and source of the cash deposits in his bank account.
The assessee submitted that was engaged in a part-time job of Multi-Level Marketing (MLM) Company which was registered in UP.
The assessee claimed that the aforesaid company was providing part-time jobs to various unemployed people who were interested in survey work. Explaining the modality of the aforesaid work, it was submitted by him that as per the scheme floated by the aforesaid company, a person who would become a surveyor/member was required to purchase one ID, and thereafter, was required to do 4 survey’s in a month. It was further stated by him that in the course of his job of trading of membership ID’s of the aforesaid company, he would purchase a membership ID for Rs.3,400/-, which, thereafter, would be sold by him for Rs.3,500/- to various people, i.e at a profit of Rs.100/- per membership ID.
It was submitted by the assessee that the cash deposits in his bank account were the sale proceeds of membership IDs of the said company.
However, the new explanation did not find favor with CIT(Appeals) who observed that it was incomprehensible that the assessee would have made cash deposits running into lacs by selling membership ID’s of Rs.3500/-.
The assessee to justify the shift in his explanation as regards the source of the cash deposits in his bank account blamed his earlier counsel, but the CIT(Appeals) did not find favor with the same. The CIT(Appeals) held a firm conviction that the assessee had come forth with a concocted story to explain the cash deposits in his bank account, and, thus, rejected the same and upheld the addition made by the A.O.
Before the Tribunal, to verify the authenticity of the claim that the amount of cash deposits in his bank account was the collection of receipts of the MLM company the assessee placed on record, copy of mail conversation with brother of the appellant
regarding transactions of Survey, copy of mail received for reset of User ID and Password, copy of news paper article, name of persons available with the assessee with whom the assessee had entered banking transactions.
The Tribunal opined that though the shift in the explanation of the assessee regarding the source of the cash deposits in his bank account during the subject year, i.e as was advanced before the A.O vis-à-vis that furnished before the CIT(Appeals) in the course of appellate proceedings do raise serious doubts as regards the veracity of the new explanation, but considering the totality of the facts in the backdrop of the documentary evidence that have been filed in support thereof, the same cannot be summarily rejected. Also, the claim of the assessee that the explanation as regards the source of the cash deposits in the assessee’s bank account as was advanced before the A.O. was tutored by his earlier counsel cannot be summarily brushed aside.
The Tribunal opined that considering the additional evidence filed by the assessee along with the working of the “peak credit” in the aforesaid bank account filed, the matter in all fairness required to be revisited by the A.O.
Accordingly, the Tribunal restored the matter to the file of the A.O with a direction to re-adjudicate the issue after considering the additional evidence filed before ITAT with liberty to assessee to substantiate his claim based on fresh documentary evidence.
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