2016 (4) TMI 862 - AT - Income Tax

Addition representing cash/cheque deposits in undisclosed bank account maintained with ICICI Bank - Held that - The transactions in the undisclosed bank account maintained with ICICI Bank has to be brought to tax by adopting the peak credit method. Thus the assessee is hereby directed to furnish the workings of the peak credit which needs to be verified by the ld.AO about its veracity. Hence we deem it fit and appropriate in the interest of justice and fair play to set aside this issue to the file of the ld.AO to frame this addition based on the workings of peak credit as would be given by the assessee and of course after verification by the ld.AO. - Decided in favour of assesseefor statistical purpose. Deemed dividend u/s. 2(22)(e)- Held that - We find from the said documents that the lending company at the outset does not possess any accumulative profit. We also find that there are some discrepancies with regard to the names of the shareholders. We also find that the lower authorities have not examined the aspect of availability of accumulated profits of the lending company. In these circumstances we deem it fit and appropriate in the interest of justice and fair play to set aside this issue to the file of the ld.AO to verify the register of the shareholders of the lending company and other relevant documents in order to ascertain the true shareholding pattern of the said company during the financial years 2007-08 and 2008-09 and to give a definite finding with regard to availability of accumulated profits of the lending company and decide the issue in accordance with law.- Decided in favour of assessee for statistical purpose. Addition on account of alleged director s remuneration - Held that - As find from the relevant page of the paper book that the assessee had borrowed loan and also repaid the same by cheques to said M/s. G.S Fertilisers Pvt. Ltd to the tune of Rs. 1, 45, 000/-. We find that this aspect has also not been examined by the ld.AO. Accordingly we deem it fit and appropriate in the interest of justice and fair play to set aside this issue to the file of the ld.AO to verify the same. - Decided in favour of assessee for statistical purpose. Addition on reimbursement of taxes - Held that - The assessee indeed had received the monies from the said companies which were duly credited in the bank account of the assessee maintained with State Bank of Hyderabad and immediately the same were indeed paid towards tax payment of the said companies through on line banking facility. We also find from the tax remittance challan as produced before us that the version of the assessee is correct. We further find that the bank account maintained with State Bank of Hyderabad is already disclosed bank account by the assessee in the return of income. While this is so there is no need to make any addition on this issue.- Decided in favour of assessee Addition representing cash deposits in the bank - Held that - There is cash withdrawal of Rs. 34, 000/- on 13-10-2008. The revenue had not not brought any contrary material/evidence to prove that this sum of Rs. 34, 000/- was spent by the assessee for some other purpose. Accordingly this would definitely remain as source for the assessee to explain the cash deposit in part. Hence we deem it fit appropriate and in the interest of justice to grant relief to the extent of Rs. 34, 000/- and confirm the balance of addition of Rs. 16, 000/- as unexplained cash deposit in the bank. - Decided in favour of assessee in part

Issues Involved:
1. Addition of Rs. 28,53,113/- representing cash/cheque deposits in undisclosed bank account.
2. Addition of Rs. 2,20,000/- towards deemed dividend under section 2(22)(e) of the Income Tax Act.
3. Addition of Rs. 1,35,000/- on account of alleged director's remuneration.
4. Addition of Rs. 51,368/- representing reimbursement of taxes.
5. Addition of Rs. 50,000/- representing cash deposits in the bank.

Detailed Analysis:

1. Addition of Rs. 28,53,113/- Representing Cash/Cheque Deposits in Undisclosed Bank Account:
The assessee maintained a disclosed bank account with State Bank of Hyderabad and an undisclosed account with ICICI Bank. The AO treated the entire credits in the ICICI Bank account, totaling Rs. 28,53,113/- (Rs. 18,94,400/- in cash deposits and Rs. 9,58,713/- in cheque deposits), as unexplained cash credit under section 68 of the Income Tax Act. The assessee claimed that the ICICI account belonged to his HUF and the cash deposits were gifts from his grandmother, while cheque deposits were proceeds from share sales. The CIT(A) disbelieved the HUF status and the gift explanation, noting inconsistencies and the death of the grandmother before the account's opening. The Tribunal directed the AO to adopt the peak credit method for taxing the transactions in the undisclosed account, requiring the assessee to provide workings of peak credit for verification.

2. Addition of Rs. 2,20,000/- Towards Deemed Dividend Under Section 2(22)(e) of the Income Tax Act:
The assessee, a director in M/s. G.S Laminators Pvt. Ltd, received Rs. 2,20,000/- as an unsecured loan from the company. The AO invoked section 2(22)(e) based on the shareholding pattern, asserting that the shares were held by the assessee's HUF. The assessee contended that he was not a shareholder, and the shares were held by an individual, not the HUF. The Tribunal found discrepancies in the shareholding records and noted that the lower authorities had not examined the availability of accumulated profits in the lending company. The issue was remanded to the AO for verification of the shareholding pattern and accumulated profits.

3. Addition of Rs. 1,35,000/- on Account of Alleged Director's Remuneration:
The AO added Rs. 1,35,000/- credited in the assessee's State Bank of Hyderabad account as director's remuneration from M/s. G.S Fertilisers Pvt. Ltd. The assessee later claimed this amount was a loan, not remuneration, and had been repaid. The CIT(A) rejected this change of stance as an afterthought. The Tribunal directed the AO to verify the ledger account and bank statements to ascertain the nature of the transaction, remanding the issue for further examination.

4. Addition of Rs. 51,368/- Representing Reimbursement of Taxes:
The AO added Rs. 51,368/- credited in the assessee's State Bank of Hyderabad account, representing reimbursements from companies for tax payments made on their behalf. The CIT(A) did not admit the bank statements as fresh evidence and upheld the addition. The Tribunal, upon verifying the bank statements and tax remittance challans, found that the reimbursements were indeed for tax payments made on behalf of the companies. The addition was deleted.

5. Addition of Rs. 50,000/- Representing Cash Deposits in the Bank:
The AO added Rs. 50,000/- deposited in cash on 21-01-2009, noting insufficient cash balance and withdrawals to explain the deposit. The Tribunal found that the assessee had withdrawn Rs. 34,000/- on 13-10-2008, which could partly explain the deposit. The Tribunal granted relief for Rs. 34,000/- and confirmed the addition of the remaining Rs. 16,000/- as unexplained cash deposit.

Conclusion:
The appeal was partly allowed for statistical purposes, with directions for further verification and examination by the AO on several issues. The Tribunal emphasized the need for accurate verification of facts and proper application of legal provisions.

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