2019 (7) TMI 1845 - AT - Income Tax

Unexplained cash credit u/s 68 - deposit in the HSBC Bank account, Hong Kong - HELD THAT - AO has considered this fact that the addition made in the hands of the assessee is subject to the outcome of the ld. Settlement Commission order since the same income cannot be taxed twice. Now the ld. Settlement Commission has already accepted the said income offered by these two firms. We have carefully perused the order of the ld. Settlement Commission wherein this amount was also part of the undisclosed income offered by these two firms for the A.Y. 2014-15. The total undisclosed income was offered which was divided between two firms M/s. Bihari Lal Holaram, partnership firm and M/s. Lakhi Gems. in ratio of 95% 5%. Finally, the said amount was accepted as offer to tax by these two firms as per the order of the ld. Settlement Commission. Once this amount has already been offered for taxation in the hands of the two partnership firms as per the order of the ld. Settlement Commission dated 22-04-2019 then the addition in the hands of the assessee is not sustainable. Accordingly, the same is deleted. Addition u/s 69C - unexplained expenditure incurred through credit card of Bank of America - not accepting the contention of assessee that payment of this card was made by his uncle Shri Sailesh Lakhi who is residing in USA - HELD THAT - The assessee in his reply before the AO has explained the source of payment of credit card bill for all the three years as such payments were made by his uncle Shri Shailesh Lakhi, resident of USA. The assessee also filed the confirmation of his uncle Shri Shailesh Lakhi regarding the payment of the credit card bill of the assessee. These facts were not disputed by the AO. Thus the expenditure incurred by the assessee through credit card itself is not an unexplained expenditure but only the payment of credit card bill can be considered as unexplained expenditure. Once the assessee has produced all the details and confirmations regarding payment of credit card bill which has not been controvered by the AO then said payment of credit card bill made by the uncle of the assessee, r/o USA, cannot be held as unexplained expenditure of the assessee. Assessee has established the source of payment and if there is a violation or financial irregularity in the payment of credit card bill by the assessee s uncle then the same cannot treated as unexplained expenditure in the hands of the assessee. Hence, the addition made by the AO on this account for all the three assessment years is not sustainable when the source of payment is not in dispute. we delete the addition made by the AO on account of credit card expenditure. - Decided in favour of assessee.

Summary

Issues:
1. Addition of unexplained cash credit in HSBC Bank account, Hong Kong under section 68 of the IT Act, 1961.
2. Addition of unexplained expenditure incurred through Bank of America Credit Card under section 69C of the IT Act, 1961 for multiple assessment years.

Issue 1: Addition of unexplained cash credit in HSBC Bank account, Hong Kong under section 68 of the IT Act, 1961:

The assessee maintained an account in HSBC Bank, Hong Kong, which was not disclosed initially. The AO added the amount deposited in this account as unaccounted cash in the hands of the assessee under section 68. The assessee explained that the account was opened on behalf of two partnership firms and the amount deposited was on behalf of these firms. The AO initiated penalty proceedings for concealment of income. The CIT(A) upheld the addition. However, the ITAT considered the Settlement Commission's order, which accepted the undisclosed income offered by the firms, including the amount in question. As the same income cannot be taxed twice, the ITAT deleted the addition in the hands of the assessee.

Issue 2: Addition of unexplained expenditure incurred through Bank of America Credit Card under section 69C of the IT Act, 1961 for multiple assessment years:

The AO added certain amounts as unexplained expenditure incurred through the Bank of America Credit Card for multiple assessment years. The assessee explained that the credit card bill payments were made by his uncle, a resident of the USA. The AO held the expenditures as unaccounted and initiated penalty proceedings. The CIT(A) upheld the additions. The ITAT noted that the source of payment was explained by the assessee, supported by confirmations from the uncle. The AO's assumption of hawala transaction was unfounded. As the source of payment was established and not disputed, the ITAT deleted the additions for all three assessment years.

In conclusion, the ITAT allowed the appeals of the assessee, deleting the additions made by the AO for both issues.