2016 (8) TMI 1164 - AT - Income Tax

Addition on cash deposits in the joint saving bank account - Held that - We take note that the assessee has filed before the ld. CIT(A) on 14.9.2015 the proof in respect to the opening cash in hand of 4, 67, 709/- as on 1.4.2008 and has filed the copy of financial statement as on 31.3.2008 along with copy of ITR for assessment year 2008-09. From a perusal of the financial statement as on 31.3.2008 we take note that the assessee had opening cash in hand and bank of 4, 67, 709/- (which included bank balance of 1, 49, 804 in Bank of Baroda account number 0099 and half of 8920 i.e 4460 in account number 07644 in BOB thus aggregate bank balance as on 1.04.2008 was 1, 54, 264.). Thus the cash in hand on 1.04.2008 was 3, 13, 345 ( 4, 67, 709 1, 54, 264 ) and the fact is that the assessee had declared 3, 96, 814 as income for assessment year 2008-09. In the light of the said documents we find that the assessee has been able to prove the source of 1, 27, 470/- and therefore we are inclined to delete the addition sustained by the ld. CIT(A) on this issue. - Decided in favour of assessee. Addition on account of accretion in the capital account - Held that - We find that the assessee has made cash contribution of 4.50 lakhs towards capital account of the assessee in the partnership firm M/s Harish Hosiery where the assessee was a partner in the relevant assessment year. The assessee has made a contribution of 4.50 lakhs from 1.4.2008 to 1.3.2009. The assessee had withdrawn an amount of 1.38 lakhs from 7.10.2008 to 30.12.2008. Thus the contribution in the capital account of the assessee was to the tune of 3.12 lakhs. The assessee submitted before the ld. CIT(A) that the assessee had sufficient opening cash balance in hand as on 1.4.2008 at 4, 67, 709/- (including bank balance of 1, 19, 804/- in Bank of Baroda account No.0099 and 50% of 8, 920/- i.e. 4, 460/- balance as on 1.4.2008 in Bank of Baroda account No.07644). Thus the aggregate opening balance in bank as on 1.4.2008 was 1, 54, 264/-. Therefore we take note that the assessee had cash in hand in the beginning of the year at 3, 13, 345/-. Thus the assessee was having sufficient opening cash in hand before making contribution in his capital account in M/s Harish Hosiery to the tune of 3.12 lakhs. So the ld. CIT(A) s reasoning that there was no document in respect to the cash in hand as on 1.4.2008 is erroneous and therefore we are inclined to delete the addition - Decided in favour of assessee.

Summary

Issues:
1. Challenge to the legal validity of the reopening of assessment under section 147/148 of the Income-tax Act, 1961.
2. Grounds against the confirmation of addition of ?1,27,470 made by the Assessing Officer towards cash deposits in the joint saving bank account.
3. Confirmation of addition of ?3.12 lakhs on account of accretion in the capital account.

Issue 1:
The appeal challenges the legal validity of the assessment reopening under section 147/148 of the Income-tax Act, 1961. The Tribunal did not delve into this issue extensively but emphasized that reopening based solely on bank deposits does not automatically imply undisclosed income. The Tribunal highlighted the necessity for a genuine reason to believe income has escaped assessment before resorting to reassessment proceedings.

Issue 2:
Regarding the addition of ?1,27,470 for cash deposits in a joint saving bank account, the Assessing Officer made this addition as income from undisclosed sources. The CIT(A) partially allowed the appeal, confirming the addition of ?1,27,470 based on lack of proof for the opening cash balance. However, the Tribunal, after reviewing the financial statements and ITR, found the assessee had proven the source of ?1,27,470 and thus deleted this addition.

Issue 3:
The addition of ?3.12 lakhs on account of accretion in the capital account was disputed. The Assessing Officer added this amount as income from undisclosed sources due to a lack of proof for a cash deposit. The CIT(A) confirmed this addition partially. However, the Tribunal observed that the assessee had sufficient opening cash balance before making the contribution to the capital account, and therefore, deleted the addition of ?3.12 lakhs.

In conclusion, the Tribunal allowed the appeal of the assessee, deleting the additions made by the Assessing Officer. The Tribunal emphasized the importance of substantiating the source of funds and highlighted the need for a genuine reason to believe income has escaped assessment before initiating reassessment proceedings.