2016 (9) TMI 694 - AT - Income Tax

Unexplained cash deposits - Estimation of income of the assessee - cash deposits made by assessee s brother in bank account - Held that - The fact is that the Assessee being a salaried employee allowed his brother to operate his bank account to run his business. The same was confirmed by his brother before the AO. In our considered view we will have two ways to address the current issue. Either to assess the income in the hands of Assessee s brother or assess the income in the hands of assessee on presumptive basis. The assessment in the hands of assessee s brother may not feasible considering the fact that all the transactions done in the assessee s bank account. It will put the AO in diffcult situation. The easiest way is to assess the income in the hands of the assessee on presumptive basis. We find it reasonable and appropriate to charge at 8% of the deposits as his income. Accordingly we direct the AO to estimate the income of the assessee at 8% of the total deposit amounts as done in the case of Assessee s brother. - Decided in favour of assessee

Summary

Issues:
1. Unexplained cash deposits in the assessee's bank account.
2. Denial of HRA claimed under section 10.

Analysis:

Issue 1: Unexplained cash deposits
The Assessing Officer (AO) observed cash deposits of ?56,96,000 in the assessee's savings bank account. The assessee attributed these deposits to his brother's business of arranging visas, but failed to provide satisfactory documentary evidence. The AO treated the entire cash deposit amount as unexplained income and added it to the assessee's returned income. The CIT(A) upheld the AO's decision, noting the absence of proper accounts for the brother and the unconvincing reasons provided for the transactions. The CIT(A) emphasized the lack of evidence supporting the claimed purpose of providing finance to students or individuals. The CIT(A) directed the AO to allow the deduction if the assessee produced evidence, which was not provided. The ITAT Hyderabad, considering the salaried nature of the assessee and the transactions in the assessee's bank account, decided to assess the income on a presumptive basis at 8% of the total deposits, similar to the assessment done for the assessee's brother in previous years.

Issue 2: Denial of HRA claimed under section 10
The assessee's claim of deduction of ?27,480 under section 10 for House Rent Allowance (HRA) was denied as the assessee could not substantiate the claim with documentary evidence. The CIT(A) directed the AO to allow the claim if the assessee produced evidence, which was not provided during the proceedings. The ITAT Hyderabad did not address this issue specifically in its judgment.

In conclusion, the ITAT Hyderabad allowed the assessee's appeal concerning the unexplained cash deposits by directing the AO to estimate the income at 8% of the total deposit amounts. The denial of the HRA claim was not explicitly addressed in the judgment.