2014 (1) TMI 835 - AT - Income Tax

Deletion of undisclosed investment in fixed deposits Held that - All the transactions are duly transacted through the disclosed bank accounts of the appellant firm, merely for the reason that there was a mistake in making entries, a disclosed investment cannot be treated as undisclosed - The CIT(A) has gone into the details of bank account maintained with Indian Overseas Bank and also noticed that the amount of Rs.20 lakhs was withdrawn by cheque and given to bank for making FDR - This is an explained FDR and in no way it can be stated that this is unexplained - The main ground of Revenue is that ledger account was not filed before the AO or no opportunity was allowed to the AO by the CIT(A) there was no infirmity in the order of the CIT(A) Decided against Revenue.

Summary

Issues:
Appeal against deletion of addition on undisclosed investment in fixed deposit.

Analysis:
The appeal by Revenue challenges the CIT(A)'s decision to delete the addition made by the AO regarding an undisclosed investment in a fixed deposit of Rs.20 lakhs. The AO added this amount as unexplained investment after the assessee failed to convince him about the source of the investment. However, the CIT(A) reviewed various documents, including bank statements and ledger accounts, and concluded that the amount was withdrawn from a disclosed bank account and used for the fixed deposit. The CIT(A) found that the AO's addition was unjustified as the investment was made through disclosed accounts and the error in recording the transaction did not make it undisclosed. The CIT(A) allowed the appeal, directing the AO to delete the addition.

The key contention of the Revenue was that the ledger account was not presented before the AO, and hence, no opportunity was given to the AO to assess the additional evidence. However, the CIT(A) thoroughly examined the details of the transaction and the bank accounts involved, determining that the investment was explained and not undisclosed. The CIT(A) exercised discretion in deciding the issue in the interest of justice, even without providing the AO with further opportunity. The ITAT Kolkata upheld the CIT(A)'s decision, finding no fault in the approach taken. Consequently, the Revenue's appeal was dismissed, affirming the CIT(A)'s order.

In conclusion, the ITAT Kolkata upheld the CIT(A)'s decision to delete the addition on the undisclosed investment in the fixed deposit, emphasizing that the investment was made through disclosed accounts and was not unexplained. The tribunal found no error in the CIT(A)'s decision-making process, leading to the dismissal of the Revenue's appeal.