Vikramjit Singh vs ACIT Circle-26(2), New Delhi – Dispute Over Unexplained Cash Deposits for AY 2016-17

Case Overview: Vikramjit Singh vs ACIT Circle-26(2), New Delhi – AY 2016-17

This article delves into the proceedings and final judgment of the Income Tax Appellate Tribunal (ITAT) Delhi Bench “SMC” in the case of Vikramjit Singh vs ACIT Circle-26(2), New Delhi. The case, identified by case number ITA 6688/DEL/2019, pertains to the assessment year (AY) 2016-17 and revolves around the issue of unexplained cash deposits. The final order was pronounced on January 12, 2022, following a hearing on January 5, 2022.

Background of the Case

Vikramjit Singh, the appellant, is a resident of New Delhi and had filed his income tax return for the assessment year 2016-17, declaring an income of Rs. 4,15,850. During the scrutiny assessment, the Assessing Officer (AO) observed that Singh had deposited Rs. 10,00,000 in cash into his bank account. The AO issued a notice to Singh to explain the source of this cash deposit.

Why the Case Was Filed

The case was filed by Vikramjit Singh to contest the addition of Rs. 10,00,000 made by the Assessing Officer, which was confirmed by the Commissioner of Income-tax (Appeals) [CIT(A)]. The AO had treated the cash deposit as unexplained income, arguing that Singh had failed to provide a satisfactory explanation for the source of the funds. Singh, on the other hand, claimed that the cash deposit was made from prior withdrawals from his bank account.

Proceedings Before the ITAT

The appeal was heard by a bench consisting of Shri Kul Bharat, Judicial Member. The appellant was represented by Ms. Ragini Handa, Chartered Accountant, while the Revenue was represented by Shri Om Prakash, Senior Departmental Representative.

The Appellant’s Arguments

Vikramjit Singh’s primary argument was that the cash deposit of Rs. 10,00,000 was made from funds that had been previously withdrawn from the same bank account during the assessment year. Singh provided documentary evidence, including bank statements, to support his claim. He argued that the AO had unjustly added the amount to his income without considering the full context of his financial transactions.

Singh also contended that the CIT(A) had erred in upholding the AO’s addition, despite the documentary evidence provided. He argued that the CIT(A) had relied on irrelevant judicial precedents that were not applicable to the facts of his case. Singh’s legal representative emphasized that the addition was unjustified and should be deleted.

The Revenue’s Arguments

The Revenue, represented by Shri Om Prakash, opposed Singh’s appeal. The Senior Departmental Representative argued that Singh had failed to adequately explain the source of the cash deposit. The AO had noted that Singh did not provide a convincing reason for withdrawing such a large sum of money and then redepositing it into his bank account. The Revenue maintained that the cash deposit should be treated as unexplained income and that the addition made by the AO was appropriate.

Final Decision of the ITAT

After considering the submissions from both parties and reviewing the material on record, the ITAT delivered its verdict on the matter.

1. Treatment of the Cash Deposit

The ITAT, led by Shri Kul Bharat, concluded that the addition made by the AO and upheld by the CIT(A) was not justified. The Tribunal observed that the AO had failed to provide any evidence suggesting that the cash withdrawn by Singh from his bank account was expended for any other purpose. The Tribunal emphasized that merely questioning the withdrawal and subsequent redeposit of the cash, without any supporting evidence, was not sufficient to treat the deposit as unexplained income.

The ITAT noted that the AO’s reliance on the judgment of the Punjab & Haryana High Court in the case of Smt. Kavita Chandra vs. CIT (Appeals), Panchkula, was misplaced. In that case, the court had ruled that unexplained cash deposits, following large withdrawals, could be treated as income. However, the ITAT found that the facts in Singh’s case were distinguishable and that the AO had not adequately considered the evidence provided by Singh.

2. Deletion of the Addition

The ITAT directed the AO to delete the addition of Rs. 10,00,000 from Singh’s income. The Tribunal held that Singh had sufficiently demonstrated that the cash deposit was made from prior withdrawals from his bank account. The absence of any evidence to the contrary meant that the addition could not be sustained.

Conclusion of the Case

The ITAT’s decision in Vikramjit Singh vs ACIT Circle-26(2), New Delhi, highlights the importance of thorough scrutiny in tax assessments and the need for Assessing Officers to base their conclusions on concrete evidence rather than assumptions. The Tribunal’s ruling reinforces the principle that taxpayers cannot be penalized without clear evidence of wrongdoing.

This case serves as a reminder to both taxpayers and tax authorities of the importance of maintaining accurate records and providing clear explanations for financial transactions during assessments. It also underscores the role of appellate bodies like the ITAT in ensuring that justice is served when disputes arise between taxpayers and the Revenue.

In summary, the ITAT’s order provides clarity on the treatment of cash deposits and reaffirms the taxpayer’s right to fair assessment proceedings. The deletion of the addition in this case sets a precedent for similar disputes, ensuring that taxpayers are not unfairly burdened with unexplained income additions without sufficient cause.

Vikramjit Singh vs ACIT Circle-26(2), New Delhi – Dispute Over Unexplained Cash Deposits for AY 2016-17