2015 (10) TMI 1455 - AT - Income Tax

Addition u/s 68 - Held that - We do find merit in the submissions made by the assessee with regard to ₹ 7,30,000/- that it was an opening balance. The reason that the assessee cannot hold this much amount in hand for such a long period of time, is, basically a bald observation made by the CIT(A). The CIT(A) has seen from the facts that the amount was actually pertaining to preceding year is not controverted even by the DR. In such a case, we cannot sustain the addition of ₹ 7,30,000/-. Coming to the smaller additions of ₹ 40,500/- and ₹ 40,250/- wherein the assessee sold his old items of furniture - The CIT(A) went through the evidence as filed by the assessee - Held that - The fact that the assessee sold certain old furniture items is mentioned in the impugned order. The main reason for rejecting the assessee claim is an apprehension that the furniture items may be capital asset. At the outset, we find this argument of the CIT(A) to be incomprehensible as to how an item of furniture could become capital asset. We, therefore are inclined to accept the argument of the AR and reverse the findings of the CIT(A). Coming to addition of ₹ 41,250/- received gifts at house warming ceremony - assessee has submitted the card before the CIT(A), who has rejected the explanation and evidence - - Held that - On going though the order of the CIT(A), we feel that the CIT(A) has held the issue dispassionately, because during ceremonies like this, some kind of gift, which is either in cash or kind is received by the person, who is performing the ceremony. In such a case, we reverse the order of the CIT(A) on this issue. Coming to addition of ₹ 2,00,000/-, which is explained by the assessee/AR that it is actually withdrawal and not deposit - Held that -This issue once again has been dealt with by the CIT(A), who has negated the explanation of the assessee, by simply saying that assessee s explanation cannot be accepted.This issue, according to us, needs fresh adjudication at the level of the AO. Decided partly in favour of assessee in statistical purposes.

Summary

Issues:
Sustainability of addition under section 68 of the Income Tax Act, 1961 based on cash deposits made by the assessee with HSBC Bank. Evaluation of evidence submitted before the CIT(A) and its consideration in the appellate process. Justifiability of the CIT(A)'s decision to sustain the addition of Rs. 8,52,000 while deleting Rs. 2,00,000 from the total amount. Assessment of the CIT(A)'s reasoning for rejecting the explanations provided by the assessee regarding various cash deposits and gifts received. Review of the CIT(A)'s decision on the nature of certain transactions and the subsequent appeal before the ITAT.

Analysis:
The appeal before the ITAT stemmed from the CIT(A)'s order sustaining the addition of Rs. 8,52,000 under section 68 of the Income Tax Act, 1961, concerning cash deposits made by the assessee with HSBC Bank. The CIT(A) had evaluated the evidence submitted by the assessee, which was not presented before the Assessing Officer (AO), and decided to uphold the addition while excluding Rs. 2,00,000 from the total amount. The CIT(A) questioned the credibility of the explanations provided by the assessee, particularly regarding the origin of certain cash amounts and gifts received. The ITAT was tasked with reviewing the CIT(A)'s decision and the arguments presented by both parties.

During the ITAT proceedings, the assessee contended that the CIT(A) had not fully considered their explanations and requested a reversal of the CIT(A)'s order. The Departmental Representative (DR) supported the decisions of the revenue authorities, emphasizing the sound reasoning provided in their orders. The ITAT carefully examined the contentions of both parties and found merit in the assessee's argument regarding the Rs. 7,30,000 opening balance. The ITAT disagreed with the CIT(A)'s assertion that the assessee could not have retained such an amount for an extended period, highlighting the uncontroverted nature of the amount's relation to the preceding year.

Regarding the smaller additions related to the sale of old furniture items and gifts received at a housewarming ceremony, the ITAT scrutinized the CIT(A)'s rationale for rejecting the assessee's explanations. The ITAT found the CIT(A)'s reasoning on these issues to be flawed and reversed the decisions, emphasizing the need for a fresh assessment by the AO. The ITAT directed the AO to reexamine the Rs. 2,00,000 addition issue, ensuring the assessee receives a fair opportunity to present their case. Consequently, the ITAT allowed relief to the assessee on multiple fronts and treated the appeal as allowed for statistical purposes, setting aside the issue for further adjudication by the AO.