2014 (8) TMI 958 - AT - Income Tax

Disallowance u/s 68 - Admission of additional evidence - Held that - AO ignored the very fact that the amount of 16, 22, 140 received by the assessee from her clients was further deposited into respective saving accounts of her clients and this amount cannot be treated as income of the assessee hence protective addition u/s 68 of the Act is not sustainable. - observations of the AO in the assessment order and remand report were made ignoring the entire modus operandi and working of the assessee and her husband as amount received from their clients for further deposition cannot be said to be income in the hands of assessee and protective addition u/s 68 of the Act is not justified under these circumstances. Therefore we are of the considered view that the CIT(A) was right in deleting the addition made u/s 68 of the Act on protective basis and we are unable to see any valid reason to interfere with the same - Decided against Revenue.

Summary

Issues:
Appeal against deletion of addition under section 68 of the Income Tax Act on account of unexplained cash credit in bank account; Admissibility of additional evidences before the CIT(A); Appreciation of client confirmations in assessing unexplained cash credit.

Analysis:
The appeal pertains to the deletion of an addition made by the Assessing Officer (AO) under section 68 of the Income Tax Act regarding unexplained cash credit in the bank account of the assessee. The assessee had declared a total income of Rs. 1,24,860, primarily from brokerage and other sources. The AO noted a cash deposit of Rs. 17,94,540 in the assessee's bank account based on AIR information. The assessee failed to provide a satisfactory explanation for the cash deposit, leading to the AO making a protective addition under section 68 of the Act.

The CIT(A) allowed the assessee's appeal, emphasizing that the amount received from clients for further deposits did not form part of the assessee's turnover, as they received commission income proportionate to the business collected. The CIT(A) deleted the addition made by the AO on a protective basis, prompting the revenue to appeal before the Tribunal.

Regarding the admissibility of additional evidences, the revenue contended that the CIT(A) erred in admitting such evidence, violating Rule 46A of the IT Rules 1962. However, the Tribunal observed that the CIT(A) followed due procedure by allowing the AO to submit a remand report and considering comments on the additional evidence, thereby dismissing this ground of appeal.

On the issue of unexplained cash credit, the revenue argued that the CIT(A) wrongly deleted the addition made by the AO under section 68, emphasizing the lack of client confirmations. The assessee's counsel highlighted that the cash received was for further deposits into clients' accounts and did not constitute income for the assessee. The Tribunal concurred with the CIT(A)'s findings, noting that the AO overlooked the nature of the transactions and the commission-based income structure of the assessee and her husband. Consequently, the Tribunal upheld the CIT(A)'s decision to delete the addition under section 68, dismissing the revenue's appeal.

In conclusion, the Tribunal upheld the CIT(A)'s order, dismissing the revenue's appeal against the deletion of the addition under section 68 of the Income Tax Act.