2012 (9) TMI 251 - AT - Income Tax

Addition u/s 69A - Cash deposits in bank contended by assessee to be out of gift made by his father for his old age/hospitalization - Held that - Out of three ingredients of identity, capacity and genuineness, though identity of the donor is established, however no material whatsoever in respect of donor s capacity has been furnished by the assessee at any stage. Assessee contends it to be out of sale of land by his father but no material has been produced to substantiate the same. Further, amount was stated to be gifted for medical treatment of his father, and assessee claims to have met the entire medical expenditure, but the same is again de hors any material. If the assessee has incurred the expenditure, he could furnish the relevant details; the money in any case would have only been withdrawn from his bank account/s or from other accounted source/s. Also, amount specifically set aside by the father for his illness and old age, was actually unspent and remained completely intact despite his prolonged illness/treatment. There are thus serious gaps in the assessee s explanation, which also impinge on the genuineness aspect of the transaction/s. Addition u/s 69A justified Addition made by estimating income from counseling and lecturing at Rs. 5.00 lacs, as against Rs. 3.52 lacs disclosed by the assessee, in the absence of maintenance of any books of account - assessee contesting power of estimation by AO on ground that assessee was not required to maintain books of accounts - Held that - Assessee was required to maintain books of accounts u/s 44AA and if books are defective AO has power to estimate income, However that there has to be some basis with the AO in enhancing the assessee s income as declared, and which we find as completely absent in the present case. Accordingly, the addition supposing a higher income is, in our view, not sustainable in law, and is thus directed for deletion - Decided partly in favor of assessee

Summary

Issues Involved:
1. Unexplained cash deposits and application of Section 69A.
2. Addition to income from counseling and lecturing due to lack of maintenance of books of account.

Issue-Wise Detailed Analysis:

1. Unexplained Cash Deposits and Application of Section 69A:

The primary issue revolves around two cash deposits of Rs. 5.00 lacs each in the assessee's joint bank account, which the Assessing Officer (AO) deemed unexplained and treated as the assessee's income under Section 69A of the Income Tax Act, 1961. The assessee claimed these deposits were gifts from his late father, supported by a letter dated 10-01-2004. However, the AO found the explanation unsatisfactory due to lack of independent evidence and the significant time gap between the purported gift date and the deposit date.

In appeal, the assessee reiterated the explanation, attributing the cash to the sale proceeds of land by his father. However, no evidence of the land sale or reasons for holding the cash for an extended period was provided. The Commissioner of Income-tax (Appeals) [CIT(A)] upheld the AO's decision, leading to the second appeal.

The Tribunal examined whether the assessee had satisfactorily proven the nature and source of the deposits. The assessee argued that all three ingredients of a genuine credit (identity, capacity, and genuineness) were met. However, the Tribunal found the explanation deficient in several respects:
- No material evidence of the land sale or the donor's capacity to gift such an amount was provided.
- The prolonged cash retention was unexplained.
- The assessee failed to substantiate the claim of incurring all medical expenses for his father.

The Tribunal concluded that the assessee did not discharge the burden of proof regarding the cash deposits. The decision in Lt. Magnilal Agarwal vs. ACIT was deemed inapplicable as the assessee failed to meet the primary onus. The Tribunal upheld the application of Section 69A, confirming the addition of Rs. 10.00 lacs as unexplained income.

2. Addition to Income from Counseling and Lecturing:

The second issue concerned the addition of Rs. 1,47,605/- to the assessee's income from counseling and lecturing, estimated by the AO at Rs. 5.00 lacs against the disclosed Rs. 3.52 lacs. The addition was based on the absence of books of account, which the assessee was required to maintain under Section 44AA of the Act.

The Tribunal acknowledged the AO's power to estimate income in the absence of books of account. However, it emphasized that such estimation must have a definite basis. The AO did not provide any specific reasons or basis for the higher estimate. The Tribunal noted that while living expenses and maintenance costs could be considered, the AO did not undertake any such exercise.

Consequently, the Tribunal found the addition unsustainable in law due to the lack of a valid basis and directed its deletion.

Conclusion:

The Tribunal partly allowed the assessee's appeal. It upheld the addition of Rs. 10.00 lacs under Section 69A as unexplained income but deleted the addition of Rs. 1,47,605/- to the income from counseling and lecturing due to the absence of a valid basis for the estimation.