2017 (1) TMI 1288 - AT - Income Tax

Addition u/s 68 - cash deposited in bank account - Held that - The assessee also furnished the copy of the gift deed for a sum of ₹ 5,00,000/- received on 29.01.2009 from her father Colonel Dharm Vir Yadav who had stated in the said gift deed that he was getting a handsome salary throughout his carrier and income tax was deducted from his salary income and that he worked as a Solider Board Secretary, after his retirement under Haryana Government. The assessee also furnished the copy of PAN number of Sh. Dharam Vir Yadav which is placed at page no. 32 and also furnished the affidavit of her brother Sh. Ashok Kumar (copy of which is placed at page nos. 34 & 35) in the said affidavit it is mentioned that his father was not feeling well and died on 04.01.2009 and that he had given a cash amount gift of ₹ 5,00,000/- to his sister Smt. Sunita before his death. Therefore, considering the totality of the facts of the present case as discussed hereinabove, the assessee duly explained the source of the gifts received from her sister, father-in-law and father. Therefore, the addition amounting to ₹ 10,00,000/- made by the AO by considering the gifts as non-genuine and sustained by the ld. CIT(A) was not justified. Addition of expenses incurred for operating Chandanvan Tiny Tots School - Held that - Carefully gone through the material available on the record. In the present case, it is noticed that the assessee was depositing receipts from tuition in her bank account maintained with Punjab National Bank in the name of Chandanvan Tiny Tots School and also had shown withdrawals, so it cannot be said that only deposits were there in the bank account as alleged by the AO. It is also an admitted fact that the assessee had shown the net income amounting to ₹ 1,20,000/- on account of tuition fee. In the present case, the assessee deposited the entire tuition fee in her bank account withdrew the amount to meet out the expenses from the said bank account and had shown net income from tuition in the profit & loss account. Therefore, the addition made by the AO and sustained by the ld. CIT(A) to the extent of ₹ 80,298/- was not justified and therefore, the same is deleted.

Issues Involved:
1. Confirmation of addition of ?10,00,000/- as undisclosed income under Section 68 of the Income Tax Act, 1961.
2. Confirmation of addition of ?80,298/- being expenses incurred for operating Chandanvan Tiny Tots School.

Issue 1: Confirmation of Addition of ?10,00,000/- as Undisclosed Income under Section 68 of the Income Tax Act, 1961

The assessee filed a return declaring an income of ?1,86,040/-, which was processed. The case was selected for scrutiny based on AIR information of cash deposits amounting to ?15,99,000/-. The assessee claimed the deposits were gifts from relatives: ?2,50,000/- from her father-in-law, ?5,00,000/- from her father, and ?3,50,000/- from her sister. The Assessing Officer (AO) found the explanations unsatisfactory and added the amounts as undisclosed income.

The AO noted discrepancies such as the absence of credit entries in the bank for the claimed dates of gifts and lack of evidence supporting the donors' financial capacity. The AO also added ?5,99,000/- as unexplained cash deposits, which the CIT(A) later deleted, accepting the assessee’s explanation that these were from earlier cash withdrawals.

The CIT(A) sustained the addition of ?10,00,000/-, questioning the genuineness and creditworthiness of the gifts. The assessee's appeal emphasized that all donors had confirmed the gifts and provided their financial details. The donors included her sister, a government school teacher receiving a family pension, her father-in-law with agricultural income, and her father, a retired Colonel.

The Tribunal found that the assessee provided sufficient evidence, including affidavits and bank statements, to substantiate the gifts. The Tribunal concluded that the AO and CIT(A) were not justified in treating the gifts as non-genuine and deleted the addition of ?10,00,000/-.

Issue 2: Confirmation of Addition of ?80,298/- as Expenses Incurred for Operating Chandanvan Tiny Tots School

The AO noticed cash deposits of ?2,00,298/- in the bank account of Chandanvan Tiny Tots School and added this amount as unexplained income, noting no corresponding expenses were debited. The assessee argued that the gross receipts were deposited in the bank and net receipts of ?1,20,000/- were shown as tuition income in the profit and loss account.

The CIT(A) sustained the addition of ?80,298/- (?2,00,298/- minus ?1,20,000/-), observing that the assessee failed to produce evidence of expenses incurred for the school.

The Tribunal found that the assessee had deposited the tuition receipts in the bank and made withdrawals for expenses, showing net income in the profit and loss account. Therefore, the addition of ?80,298/- was not justified and was deleted.

Conclusion:

The Tribunal allowed the appeal, deleting the additions of ?10,00,000/- and ?80,298/-. The Tribunal concluded that the assessee had adequately explained the sources of the gifts and the expenses incurred for the school. The orders of the lower authorities were found to be unjustified based on the evidence provided by the assessee.

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