2017 (5) TMI 4 - AT - Income Tax

Addition of amount deposited by the deceased assessee in his bank account as income from commission - addition u/s 68 - Held that - The assessee expired on 04/09/2008, for which the death certificate is placed on the record and the ld. CIT(A) considered the deposit till the date of death of the assessee as commission income and the deposits were of ₹ 20,21,147/-. The ld. CIT(A) considered the amount as a commission income from insurance business and 50% of the same was estimated as income. However, from the close scrutiny of the bank account, notice that the cash was deposited and thereafter the cash has withdrawn with a regular intervals and the highest peak of deposits in this bank account of the assessee comes at ₹ 89,332/- on 30/8/2008. The pattern of deposits and withdrawals shows that the income credited in this account was out of the cash transactions of trading activity, therefore, the provisions of Section 44AF of the Act for estimating the income of the assessee on the total deposit of ₹ 20,21,147/- has to be considered. The 5% of deposit of ₹ 20,21,147/- comes to ₹ 1,01,057/-. The peak of the deposits in this account also comes at ₹ 89,332/-, thus the income of the assessee for this period out of these transactions recorded in bank can reasonably and justifiably be estimated at ₹ 1,01,057/-. Thus, this ground of the assessee s appeal is partly allowed. Receipt of commission from insurance as reflected in Form 26AS - treated as income from other sources - Held that - No explanation was furnished by the ld AR of the assessee before the ld. CIT(A) as well as before this Bench, therefore, find no infirmity in the order of the ld. CIT(A) and the same is hereby sustained.

Summary

Issues involved:
1. Addition of cash deposits as income from commission
2. Consideration of expenses for earning commission

Analysis:

Issue 1: Addition of cash deposits as income from commission
The appeal was filed against the order by the ld CIT(A)-III, Jaipur for A.Y. 2009-10, regarding the addition of cash deposits in the bank account as income by invoking Section 68 of the Income Tax Act, 1961. The ld CIT(A) reduced the addition to 50% of the total deposit. The appellant challenged the addition, arguing that the deceased assessee deposited a specific amount, and no income could be earned post his death. The ld CIT(A) considered the deposit as commission income from insurance business, estimating 50% as net income. However, upon scrutiny, it was revealed that the deposits and withdrawals indicated cash transactions related to trading activity. The income was estimated at 5% of the total deposit, resulting in a lower income calculation. The appeal was partly allowed based on this analysis.

Issue 2: Consideration of expenses for earning commission
The second ground of appeal involved the receipt of a specific amount as commission from insurance, reflected in Form 26AS. The ld CIT(A) sustained the addition as income from other sources due to the lack of explanation or evidence provided by the appellant. The appellant requested verification of the amount, citing limitations in verifying the same. Despite the appellant's submissions, no evidence was furnished to support the claim. As a result, the addition was confirmed by both the ld CIT(A) and the Bench, upholding the decision based on the available facts. The appeal was partly allowed, considering the circumstances and evidence presented during the proceedings.