Cash Deposits Made By Taxpayer Out Of His Known Source Of Income: Ahmedabad ITAT Deletes Addition U/s 68
The Ahmedabad ITAT held that no addition is permitted u/s 68 once assessee had properly substantiated that cash deposits are made out of his known source of income. Section 68 of Income Tax Act aims to ensure individuals and corporations transparently disclose their income by addressing unexplained cash credits in their books of accounts, placing the responsibility on the taxpayer...
The Ahmedabad ITAT held that no addition is permitted u/s 68 once assessee had properly substantiated that cash deposits are made out of his known source of income.
Section 68 of Income Tax Act aims to ensure individuals and corporations transparently disclose their income by addressing unexplained cash credits in their books of accounts, placing the responsibility on the taxpayer to prove the legitimacy of such credits.
The Division Bench of Suchitra Kamble (Judicial Member) and Narendra Prasad Sinha (Accountant Member) observed that “component of cash deposit cannot be corelated with the sale receipts of the property as the cash component is related to the assessee's savings account for which the assessee has given explanation are out of cash deposits made by the assessee out of his known source of income”.
Facts of the case:
The assessee, an individual filed his return declaring a total income of Rs 1,80,270/-. His case was selected for limited scrutiny based on the information mentioned in the individual transaction statement which stated the assessee has purchased immovable property amounting to Rs.49,50,000/-, sold immovable property at Rs.1,80,00,000/- and deposited cash in Bank of Baroda amounting to Rs.34,30,000/-. The AO then proceeded to made addition of Rs.49,50,000/- thereby treating the same as unexplained investment u/s 68. The AO also made addition of Rs.34,30,000/- in respect of unexplained cash credit u/s 68 as well as addition of Rs.1,80,00,000/- as Short-Term Capital Gain (STCG).
Observation of the Tribunal:
The Bench found that provision regarding unexplained cash credit was invoked after taking cognizance of the cash deposits and the savings account of assessee with Bank of Baroda.
Thus, the Bench observed that since the transaction was very well recorded in the bank statement, which is savings account of assessee, it has to be treated as books of assessee as the assessee is an individual and is not filing books of account in the common parlance that of the Company's books of account.
Hence, the contention of assessee that Section 68 cannot be invoked does not sustain, added the Bench.
As regards to the component of cash deposits of Rs.34,30,000/-, the Bench found that assessee has categorically mentioned before the CIT(A) that sale receipt of property was received in cheques.
The Bench observed that the component of cash deposit cannot be corelated with the sale receipts of the property as the cash component is related to the assessee's savings account for which the assessee has given explanation.
When cash deposits made by assessee out of his known source of income was duly substantiated, the Bench pointed that such aspects should have been verified by AO.
Hence, observing that this aspect requires to be remanded back to the file of AO for proper adjudication and verification as per Income Tax provisions, the ITAT partly allowed Assessee's appeal.
Counsel for Assessee/ Appellant: Mahesh Chhajed
Counsel for Revenue/ Respondent: J.L. Bhatia
Case Title: Bhavanji Jugaji Thakor verses The Income Tax Officer
Case Number: ITA No. 974/Ahd/2023