2012 (12) TMI 484 - AT - Income Tax

Assessee had received gifts during her marriage and credit the same in bank account Such addition first made in hand of HUF where CIT(A) delete the same - Instead of filing appeal before Tribunal AO made addition in hand of assessee - Mere non-supply of copies of the statements which were recorded at the assessment stage would vitiate the entire proceedings Held that - Non-supply of copies of the statements which were recorded at the assessment stage of HUF is only procedural lapse but it cannot vitiate the entire proceedings. The AO of HUF had conducted a detailed enquiry. However, the additions were wrongly made in the income of the HUF. As per the findings of the AO sum was credited in the bank account of the assessee. Therefore, the same was liable to be taxed in the hands of the assessee and not in the hands of the HUF. The findings of the CIT(A) in the case of appeal filed by HUF cannot be applied in the present case for the reasons that prima-facie amount was not taxable in the hands of HUF. But, at the same time, that amount cannot escape tax liability. Non-supply of documents/statements by the Assessing Officer to the assessee can be termed as procedural lapse. Therefore, the amount is liable to the taxed in the hands of the assessee. Issue decides in favour of revenue. Disallowance of interest expense AO argued that assessee had diverted the borrowed funds for non-business purposes Held that - As concluding from the facts of the case that it was categorically stated that the personal accounts and business accounts were separately maintained by the assessee and there was no inter-connection transaction between personal and business accounts. The assessee had advanced monies from her personal account. This fact is reflected from bank statement. Issue decides in favour of assessee

Summary

Issues:
1. Reopening of assessment under section 147 of the Act.
2. Addition of unexplained gifts under section 68 of the Act.
3. Disallowance of interest amount.

Reopening of Assessment:
The case involved the reopening of the assessment under section 147 of the Act. The Assessing Officer initiated proceedings against the assessee based on information received regarding unexplained gifts received during the assessee's marriage. Initially, the amount was assessed in the hands of the assessee's father, but the CIT(A) deleted this addition. The Tribunal held that the reopening proceedings were valid as the income chargeable to tax had escaped assessment in the hands of the assessee. The Tribunal reasoned that the CIT(A)'s findings regarding the father's income did not affect the taxability of the gifts in the assessee's hands. The Tribunal dismissed the cross objections of the assessee, upholding the validity of the reopening.

Addition of Unexplained Gifts:
The Revenue contested the deletion of the addition made under section 68 of the Act concerning unexplained gifts received by the assessee. The Revenue argued that procedural lapses in providing statements from the father's assessment did not invalidate the addition. The Tribunal disagreed with the CIT(A)'s findings and held that the amount of unexplained gifts should be taxed in the hands of the assessee, not the father. The Tribunal allowed this ground of appeal by the Revenue, emphasizing that the amount was liable to be taxed in the assessee's hands.

Disallowance of Interest Amount:
Regarding the disallowance of interest amount, the assessee had claimed that the funds advanced were from personal accounts, not borrowed funds. The CIT(A) had deleted the addition, stating that there was no inter-connection between personal and business accounts. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal on this ground. The Tribunal found that the interest amounting to Rs. 23,20,861 was rightly not disallowed by the CIT(A).

In conclusion, the Tribunal partly allowed the Revenue's appeal and dismissed the Cross Objections of the assessee. The Tribunal upheld the validity of the reopening of the assessment, supported the addition of unexplained gifts in the assessee's hands, and confirmed the deletion of the disallowance of interest amount.