2015 (9) TMI 439 - AT - Income Tax

Addition u/s 68 - assessee received a portion of cash through the will of his father who expired on 28.12.2002 and his aunty who expired on 14.6.2003 - Held that - We notice that the assessee has a written a letter dated 10-12-2010 before the assessing officer, wherein he has pointed out that the assessing officer is asking for details of the income of the deceased person after expiry of about six years since the demise of the executor of the will. Though the said letter was written in the context of the will executed by the father of the assessee, the same reasoning equally applies to the will written by Smt. Ganga Tarachand Ahuja. The said lady died on 14.6.2003 and the information relating to her income was being sought in December, 2010, i.e., after expiry of about seven years. Hence, the difficulty on the part of the assessee to obtain necessary details, in our view, should be appreciated. However, we notice that the assessee has obtained certificate about availability of agricultural income in the hands of the executors of the will, which in a way substantiates the availability of income. Hence, in the peculiar facts of the case, we are of the view that the tax authorities have rejected the claim of receipt of cash through wills, only on the basis of surmises and conjectures and accordingly we are of the view that the said claim requires to be accepted. we are of the view that the claim of availability of cash as on 31.3.2004 should be accepted in the peculiar facts and circumstances of the case and accordingly there is no justification in assessing the same as income of the assessee. Accordingly, we set aside the order of Ld CIT(A) on this issue and direct the assessing officer to delete the assessment of the impugned cash balance. - Decided in favour of assessee.

Summary

Issues:
Validity of reopening of assessment under section 68 of the Income Tax Act for the assessment year 2004-05.

Analysis:
The appellant contested the reopening of assessment but later withdrew the challenge. The assessing officer reopened the assessment for AY 2004-05 based on the claim of possessing cash balance of Rs. 40,68,404 as on 31.3.2004. The appellant explained receiving cash through wills of deceased relatives. However, the AO assessed the entire cash balance as the appellant's income, disregarding explanations about inheritance and agricultural income. The CIT(A) upheld the assessment, noting lack of verification of cash availability in the wills and rejecting claims of agricultural income without sufficient reason.

The appellant argued that the AO overlooked financial statements filed for previous years and double-assessed income for AY 2004-05. The appellant provided will copies and certificates of agricultural income, challenging the adverse inferences drawn. The Department contended that the agricultural income certificates were an afterthought, and without filed returns, claims couldn't be verified. The ITAT observed the AO's failure to consider previous financial statements and unjust assessment of opening cash balance. The ITAT determined the double assessment of income for AY 2004-05 and accepted the claim of cash receipt through wills, directing the AO to delete the assessment of the cash balance.

In conclusion, the ITAT allowed the appeal, emphasizing the need to consider previous financial statements, rectify double assessment, and accept the claim of cash receipt through wills. The ITAT set aside the CIT(A)'s decision and directed the AO to delete the assessment of the cash balance claimed for AY 2004-05.