INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Alleged unexplained cash deposit - Assessee reasonably explained source of cash deposit

AO found that assessee deposited huge cash amount in his bank account. Since the assessee did not file any return of income, notice under section 148 was issued. However, there was no compliance on the part of the assessee and even no return of income was filed. Accordingly, the AO proceeded under section 144 and completed assessment treating the whole of the cash deposits as unexplained income of the assessee. Before, CIT (A), the assessee submitted that such cash deposit was out of cash withdrawal made by him earlier during the year. CIT (A) accepted the fact that the cash was withdrawn by the assessee. However, since the cash was subsequently deposited after 10 months, the explanation of the assessee that he kept the cash with him for as long as 10 months was not found acceptable and addition so made by the AO was confirmed. Held: It was found that cash deposit by assessee was out of cash withdrawal made by him earlier during the year. Assessee explained that the said withdrawal was made out of maturity of fixed deposit receipt. He further explained that fixed deposit was made out of compensation amount received from RIICO, being 5/8 share in the ancestral agricultural land, which was acquired by RIICO in the preceding financial year. Thus, the assessee reasonably explained the source of cash deposit in his bank account, which was the amount of compensation received on sale of his agricultural land. Where the compensation on sale of agriculture land was not disputed, the amount deposited out of such compensation could not be disputed. Therefore, where the source was clearly established, merely on account of fact that there was certain time gap between withdrawal and deposit could not be held against the assessee and hence, there was no justifiable basis for holding that the amount so deposited remained unexplained.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. :

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