The main legal point established is the requirement for a believable and evidenced explanation for unexplained cash deposits and transactions, as per Section 68 of the Income Tax Act.

SANJIV KHANNA, J.

Appellant-Krishan Kumar Sethi has filed the present appeal under Section 260-A of the Income Tax Act, 1961 (‘Act’ for short), which relates to assessment year 2005-06 and impugns the order dated 8.7.2016 passed by the Income Tax Appellate Tribunal (Tribunal).

2. In the return of income filed for the AY 2005-06, the appellant had declared taxable income of Rs.4,05,265/- from the business of sale/purchase/financing of three-wheeler/scooters on commission basis and income earned under the head “income from house property”.

3. The Assessing Officer (‘AO’), vide assessment order dated 28.12.2007, made addition of Rs.36,80,000/- as income from undisclosed sources invoking Section 68 of the Act on account of unexplained cash deposits of Rs.92,80,000/- in the bank accounts of the appellant and his minor sons- Master Sahil Sethi and Sarik Sethi. These deposits were made on different dates and sometimes there were multiple deposits even on a single day. The appellant, on being asked, could not furnish details and explain source of deposits. The AO had made addition of peak cash in hand of Rs.36,80,000/-.

4. The appellant in the appeal, for the first time, took the stand and position that he had had received Rs.33,00,000/- as advance in cash from Anuj Garg, R.K. Garg, Gaurav Gupta and Dinesh Garg, with whom he and his wife had entered into two Agreements to Sell dated 27th August, 2004 for Rs.45,00,000/- in respect of property No.F-2/25, Krishna Nagar, Delhi. This amount and personal savings of Rs.3,00,000/- had been deposited in the bank account of the appellant and his minor sons - Master Sahil Sethi and Sarik Sethi on different dates. The Commissioner of Income Tax (Appeals) [CIT(Appeals)] accepted the aforesaid explanation and deleted the addition vide order dated 27th March, 2009, recording as under:-

“6. Determination:

The submissions made by the appellant have been carefully considered in view of the facts and circumstances of the case and the provisions of law. It is observed that the Assessing Officer has made the addition u/s 68 of the Act on account of bank deposits on the basis of AIR information received in this case, on the ground that the assessee could not justify the same. This, however, cannot be taken as a sufficient ground for making such addition in the absence of any cogent reasons or evidence to the contrary brought on record.

6.1. The Ld. Authorised Representative on the other hand has furnished the relevant details in this regard, which have been placed on record. It has been submitted that the assessee is doing the business of sale/purchase (financing of three wheeler scooters) on commission basis. He also derives income from house property. The assessee has filed his Income-tax return for the assessment year 2005-06 declaring net income of Rs. 4,05,265/-.

6.2. It has been submitted that the assessee owns property No. F 2/25, Krishna Nagar, Delhi, along with his wife, Smt. Jyoti Sethi. The said property is given on rent to Axis Bank. The rental income from the bank has been duly reflected in the Income-tax return. The bank also deducts tax from the payments of rent. TDS certificate has already been filed along with the return. Copy of purchase deed of property was filed along with the return for A.Y. 1997-98 when the assessee had purchased the said property. Copy of the same has been furnished in support which has been placed on record.

6.3. It has been submitted that during the year under consideration, the assessee and his wife, Smt. Jyoti Sethi, entered into an agreement for sale of the above property with Sh. R.K. Garg, Sh. Gaurav Gupta, Sh. Dinesh Garg and Sh. Anuj Garg on 27.08.2004 for a consideration of Rs. 45 lakhs. Copy of agreement for sale has been furnished in support which has been placed on record. The documents in original have also been produced for verification during the course of the appellate proceedings.

6.4. It has been submitted that the assessee and his wife received a