2014 (7) TMI 179 - AT - Income Tax

Addition u/s 69 of the Act - Increase of amount of bank account Deposit of tuition fee Held that - The assessee is a teacher has been receiving monthly salary from the Sanskriti School in all the relevant assessment years - the assessee has been filing returns and has been consistently claiming in the said return certain income as her tuition fee income for the assessment years - the returns were filed by the assessee regularly every year u/s 139(1) and the veracity of the claim of the assessee in respect to her certain income as tuition fee income has not been questioned in any of the AY s the addition of the tuition income, as income from undisclosed source is not permissible in the eyes of law particularly even in the year, sum has been declared and assessed as tuition income - There is no material to show that ₹ 3,41,000/- is from a source other than the tuition income the addition made by the AO and later on confirmed by the CIT(A) in respect of tuition fee income, which the assessee has been consistently claiming cannot be said to be her income from undisclosed source; and her claim in the regular return filed in respect to tuition income being accepted and taxed by the predecessor AO cannot be discarded in the absence of any specific incriminating materials to suggest otherwise Decided in favour of Assessee. Addition u/s 69B of the Act Payment made to M/s Shah Construction out of her savings bank account with HDFC bank Held that - The reasoning of the CIT(A) cannot be sustained for the simple reason that the assessee was in receipt of tuition income which was regularly reflected by her in her duly returned income filed u/s 139(1); and regularly brought to tax and has been as a fact taxed in the hands of the assessee; and moreover we find that the assessee/ appellant had sufficient disclosed income in her saving banks accounts to finance the construction - the amount of ₹ 3,90,000/- has been paid by cheque from HDFC Bank account on 21st December 2005; and M/s. Shah Construction has confirmed that it has received ₹ 3,90,000/- from assessee thus, the addition is liable to be set aside Decided in favour of Assessee. Addition u/s 69C of the Act Held that - The assessee has made an expenditure of ₹ 3.1,989/- for the AY - The tuition income of the assessee in regular return is ₹ 3,45,000 - The amount incurred for construction has been paid by the appellant by cheque for ₹ 3,90,000/- to Ms. Shah Construction and it has been confirmed by the receipt - the AO did not take into consideration, the fact of payment of ₹ 3,90,000/- to M/s. Shah Construction vide cheque No. 400185 dated 21st December, 2005 for the construction at Noida and though the AO has accepted that an amount was withdrawn by the assessee from the bank for the relevant AY - the AO has erroneously stated that ₹ 3,90,000/- was invested in the construction of house at Noida from cash in hand, whereas the assessee has made the said transaction through cheque bearing no. 400185 dated 21st December 2005 thus, the addition sustained by the CIT(A) is to be set aside Decided in favour of Assessee. Addition of interest income Held that - The assessee has shown income from other sources which include interest on FDR and as interest on saving bank - the total interest income as per the computation and also as per the capital account is shown the AO has worked out the interest income as such there is a difference of ₹ 812 thus, the deletion of addition of ₹ 10,200/- and add only ₹ 812/- is directed to the income of the assessee - Decided in favour of Assessee.

Issues Involved:

1. Addition of Rs. 3,41,000/- as undisclosed income for AY 2003-04.
2. Addition of Rs. 3,90,000/- as unexplained investment in house construction for AY 2006-07.
3. Addition of Rs. 31,989/- as unexplained expenditure for AY 2006-07.
4. Addition of Rs. 11,012/- as interest income for AY 2006-07.
5. Addition of Rs. 2,25,000/- as undisclosed income for AY 2007-08.
6. Addition of Rs. 16,549/- as interest income for AY 2007-08.

Detailed Analysis:

1. Addition of Rs. 3,41,000/- as undisclosed income for AY 2003-04:

The assessee, a teacher at Sanskriti School, filed income tax returns showing an income of Rs. 4,56,793/-, which included Rs. 3,60,000/- as tuition income. The Assessing Officer (AO) added Rs. 3,41,000/- as undisclosed income, which was contested by the assessee, claiming it was part of the tuition income already declared. The CIT(A) provided partial relief but upheld the addition of Rs. 3,41,000/-. The Tribunal found that the AO had added the same income twice without any specific incriminating material and directed the deletion of the addition, recognizing the tuition income as already declared and taxed.

2. Addition of Rs. 3,90,000/- as unexplained investment in house construction for AY 2006-07:

The assessee declared an investment of Rs. 3,90,000/- in house construction, supported by a valuation report from a registered valuer. The AO estimated the cost at Rs. 7,60,000/- and considered Rs. 6,41,649/- as unexplained investment. The CIT(A) accepted the valuer's cost but treated the investment as unexplained. The Tribunal found that the assessee had sufficient disclosed income and bank statements confirming the payment to M/s Shah Construction. The addition was deleted as the investment was made from disclosed sources.

3. Addition of Rs. 31,989/- as unexplained expenditure for AY 2006-07:

The AO added Rs. 31,989/- as unexplained expenditure based on certain receipts found during the search. The assessee claimed the expenses were from withdrawals and tuition income. The Tribunal found that the AO had not properly considered the cash flow and withdrawals, and the addition was based on conjectures. The Tribunal directed the deletion of the addition.

4. Addition of Rs. 11,012/- as interest income for AY 2006-07:

The AO calculated interest income at Rs. 77,924/- against Rs. 77,112/- declared by the assessee, leading to an addition of Rs. 812/-. The Tribunal found that the AO had not considered Rs. 10,200/- as interest income. The Tribunal directed the deletion of Rs. 10,200/- and upheld the addition of Rs. 812/-.

5. Addition of Rs. 2,25,000/- as undisclosed income for AY 2007-08:

The AO added Rs. 2,25,000/- as undisclosed income, treating it as separate from the tuition income declared by the assessee. The Tribunal, following the same reasoning as for AY 2003-04, directed the deletion of the addition, recognizing it as part of the declared tuition income.

6. Addition of Rs. 16,549/- as interest income for AY 2007-08:

The AO added Rs. 16,549/- as the difference in interest income calculation. The Tribunal found that the assessee could not show any error in the AO's calculation and upheld the addition.

Conclusion:

The Tribunal allowed the appeals partly, directing the deletion of additions related to tuition income and unexplained investment while upholding minor additions related to interest income discrepancies. The judgments emphasized the need for specific incriminating material and proper consideration of disclosed income and bank statements.

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