The case involves an assessee engaged in the business of readymade garments who declared business income of Rs. 3,05,400 and interest income of Rs. 1,57,086. The assessee also deposited cash Rs. 15,68,000 in the bank, which was not fully explained during the assessment proceedings. The Assessing Officer made an addition of Rs. 3,00,000 to the total income of the assessee, which was charged at a normal tax rate.
During the proceedings under section 263, the Pr. CIT observed that the difference between the cash deposit and the gross business turnover of the assessee during the relevant assessment year was actually Rs. 7,79,100, which was not explained. The Pr. CIT also opined that the addition made on account of the unexplained cash deposit should have been taxed under section 115BBE(1) of the Act at a flat rate of 30%, instead of the normal tax rate.
The husband of the assessee was a retired colonel from the Indian Army, and the family was financially well-off. The Assessing Officer had taken a plausible view after examining the relevant details furnished by the assessee. The assessee and her husband were super senior citizens and had liquid funds/banknotes at their disposal to meet urgent medical contingencies, and their children were sending them money for their day-to-day needs.
The Tribunal held that the Pr. CIT had initiated proceedings without any material or evidence demonstrating that he had acted in a reasonable manner. The chargeability of cash deposit for the purpose of taxation and the applicability of section 115BBE(1) could be separately looked into by the Department.
The Tribunal also noted that it was common practice in most households in India for children to take care of their parents financially, even if the parents were financially well-off. In such circumstances, the order passed by the Pr. CIT under section 263 was held as unjustified, invalid, and liable to be quashed in favor of the assessee.
In conclusion, the case highlights the importance of quasi-judicial authorities considering the practicalities of given circumstances before resorting to any provisions of the Act. The Tribunal’s decision also takes into account the fact that the elderly assessee and her husband had liquid funds/cash at their disposal to meet urgent medical contingencies and that their children were sending them money for their day-to-day needs.
[Shergil Harjit v. PCIT (2022) 136 taxmann.com 413 (ITAT Pune)]
