Overview of the Income Tax Appeal: ITA No. 1609/DEL/2022
The Income Tax Appellate Tribunal (‘the Tribunal’) in Delhi heard the case ITA No. 1609/DEL/2022, involving the appellant Shyam Sunder Lal of New Delhi and the respondent ACIT, Central Circle-5, New Delhi, concerning assessment year 2014-15. This case scrutinizes the validity of cash deposits found in the appellant’s bank accounts, which were added as undisclosed income by the Assessing Officer (‘AO’). The Tribunal’s decision to allow the appeal sheds light on the assessment of cash deposits in income tax scrutiny.
Background and Proceedings
The appeal challenges separate orders from the ld. CIT(A) – 24, New Delhi dated 09.06.2022 regarding cash deposits in the appellant’s bank accounts. The search and seizure action on 12.03.2019 and 13.03.2019 under Shri Kshitij Lal Group led to the execution of a search warrant in the name of the assessee, Shyam Sunder Lal, resulting in the discovery of these deposits across several assessment years.
During the scrutiny assessment proceedings for AY 2014-15, the AO noticed cash deposits totaling Rs. 10,00,000 in accounts maintained in Dena Bank and State Bank of India. The assessee was requested to explain the source of these deposits.
Assessee’s Explanation and Tribunal’s Analysis
In response, Shyam Sunder Lal submitted bank statements and cash books from AY 2013-14 to AY 2019-20, categorically explaining that the impugned cash deposits originated from available sources. Despite this, the AO dismissed these explanations, leading to additions to the assessee’s income for the said AY.
The Tribunal carefully reviewed the cash flow statements and other submissions by the assessee. It found that on each date of cash deposit, there was sufficient cash on hand to cover the deposited amounts, contradicting the AO’s assumption that the funds were unaccounted for. The decision was supported by citing similar precedents, most notably the case of Kulwant Rai 291 ITR 36, where the Delhi High Court held that withdrawals in excess of cash found during a search cannot be disregarded without concrete evidence of expenditure for unrelated purposes.
Conclusion and Implications
The Tribunal’s decision to allow Shyam Sunder Lal’s appeal underscores the necessity for the AO to provide substantial evidence when disputing the legitimacy of cash deposits. This case highlights the importance of maintaining accurate financial records by taxpayers to substantiate their claims and the rigorous scrutiny required by law enforcement to validate additions to income. The ruling also underlines the Tribunal’s role in ensuring fair assessments and respect for procedural justice in tax disputes.
In conclusion, the Tribunal’s judgment on ITA No. 1609/DEL/2022 serves as a significant reference point for assessing cash deposits in bank accounts during income tax assessments. By directing the AO to delete the additions for the impugned assessment years, it reinforces the principle that explanations provided by taxpayers, when supported by credible evidence, should be given due weight.
