2015 (10) TMI 377 - AT - Income Tax

Taxability of interest income in case of Joint Bank Account - Unexplained cash deposited in the bank account - addition made on protective basis - Held that - A tax auditor has examined the books of account of Rahul H. Shah. As per the balance sheet drawn as on 31st March, 2008 a Corporation Bank SB Account No.15986 was duly disclosed. The deposits were in the regular course of business on several dates and some of the entries were contra entries in the bank account. Learned AR has pleaded on the basis of those evidences that although the said bank account stood in the name of the assessee as well as in the name of her son but for all purposes that was operated by son and not by the assessee. Sri Rahul H. Shah has also made a declaration before the AO that the transactions in the Corporation Bank Account were duly recorded in his books of account. In a situation when a tax payer, i.e., a son is duly disclosing the said transaction in the regular course in his books of account and those entries were duly disclosed in the income tax return then those very entries are not required to be again assessed, if Revenue is not satisfied, in the hands of that person who is one of the account holder. Although, the name of the assessee appeared as first name in the said bank account but for all practical purposes the son was operating that account as is evident from several evidences which were in the notice of the Revenue Department. Therefore on merits, we are of the view that the entries being explained in the case of the son and the Revenue Department has not taken any action in the case of the son, therefore, there was no justification to add those very entries in the hands of her mother, i.e., the appellant before us. Once, we have taken a decision on merits and directed to delete the addition, therefore, the legal issue raised as per the additional ground need not to be addressed by us. Rather, this additional ground has become infructuous. - Decided in favour of assessee.

Summary

Issues:
1. Addition of unexplained cash deposited in the bank account
2. Protective vs. substantive basis of assessment

Detailed Analysis:
1. The appeal involved an issue regarding the addition of INR 19,89,225 made by the Assessing Officer on the grounds of unexplained cash deposited in the bank account. The appellant contended that the said account was operated by her son and not by her. The AO, however, assessed the amount on a protective basis in the hands of the assessee. The CIT(A) confirmed the addition and held that the amount should be taxed on a substantive basis in the hands of the assessee, as the account was jointly maintained by the assessee and her son. The appellant failed to produce evidence to justify the claim that the deposits were made by her son. The CIT(A) dismissed the appeal, considering the addition as substantive in the hands of the assessee.

2. An additional ground was raised challenging the assessment order framed on a protective basis in the absence of a substantive assessment. The Revenue Department confirmed that no substantive addition was made in the hands of the son, and the addition was considered substantive in the hands of the assessee. The appellant argued that in the absence of substantive assessment, there was no basis for a protective assessment. The appellant relied on a Supreme Court order in support of their argument. The Revenue Department contended that there is no requirement for a substantive addition before a protective assessment can be made, citing relevant case law.

3. Upon examination of the evidence, it was revealed that the bank account in question was jointly held by the assessee and her son, with the son primarily operating the account. The son had disclosed the bank account in his books of accounts and income tax return for the relevant assessment year. The entries in the account were explained in the son's records, and no action was taken against him by the Revenue Department. The Tribunal concluded that since the son had duly disclosed and explained the transactions in his books and returns, there was no justification to add the same entries to the assessee's income. Consequently, the Tribunal allowed the appeal, directing the deletion of the addition made by the AO. The additional ground challenging the protective assessment became redundant in light of the decision on the merits of the case.