2017 (5) TMI 64 - AT - Income Tax

Unexplained deposits in bank account - Held that - The assessee has filed the copies of the pattadar pass books of his parties during the assessment proceedings itself, but had not filed the confirmation letters due to which both the AO as well as the CIT (A) were not inclined to accept the assessee s contention. We have also gone through the news paper report dated 28.8.2012 in which the news of the assessee s arrest is published. The arrest of the assessee is also during the same period during which the appellate proceedings were taken up by the CIT (A). Therefore, we are convinced that the assessee was prevented by reasonable cause in producing the relevant material before the CIT (A). In view of the same, we are inclined to admit the additional evidence filed by the assessee and remand the same to the file of the AO for verification Unexplained cash deposit - Held that - CIT (A) confirmed the order of the AO as the assessee did not submit any specific source for this deposit. Similarly with regard to the sources of deposits in the cash flow statement, the assessee had shown only ₹ 4,10,000 as deposit in the said Bank on 22.9.2008 as out of the flow of cash in the cash flow statement, but the assessee has not shown the source of cash deposited of ₹ 5.00 lakhs on 30.06.2008 and ₹ 2.00 lakhs on 26.08.2008 as outflow in the cash flow statement. AO, therefore, treated the sum of ₹ 7.00 lakhs as unexplained investment and brought it to tax u/s 69 of the Act which was confirmed by the CIT (A) and the assessee is in appeal before us by raising grounds of appeal Nos 3 & 4. Even before us also, the learned Counsel for the assessee reiterated the submissions made before the authorities below, but has not been able to substantiate his contention with any evidence. As the AO and the CIT (A) have verified the cash flow statement and found that the sources for the cash deposits shown as cash withdrawal are not correct, we do not see any reason to interfere with their orders. Income from other sources - contention of the assessee that a sum of ₹ 4.00 lakhs was received from his father who is the owner of vast agricultural land - Held that - we are inclined to accept the assessee s contention as the transaction is between a father and son and father is a person with resources and the probability of the payment cannot be doubted. The fact that the assessee s father has sufficient source to give a loan to his son is sufficient to delete the addition. This ground of appeal is accordingly allowed. Addition made on account of low withdrawals - Held that - We find that the assessee is stated to have withdrawn only a sum of ₹ 2,90,000 for the relevant A.Y, for his personal needs though he was the owner of a Scorpio Car and maintained the same. The AO has estimated the personal expenses of the assessee at ₹ 50,000 p.m. as reasonable expenditure and has accordingly made an addition of ₹ 3,10,000 on account of low withdrawals and the CIT (A) has confirmed the same. As the assessee has not furnished any proof or evidence before us to demonstrate that the sum of ₹ 2,90,000 is sufficient for his standard of living, we do not see any reason to interfere with the orders of the authorities below. This ground of appeal is accordingly rejected. Addition of sum received by the assessee from his wife - Held that - The assessee has filed a copy of the return of her income wherein the assessee s wife has returned business income of ₹ 1,94,714 and agricultural income of ₹ 7,25,000 i.e. nearly ₹ 9,15,000 from which the assessee has explained that ₹ 9.00 lakhs was received from his wife. Though the assessee s wife is shown to have sufficient income, but it cannot be accepted that the entire income has been given to the husband which is shown as source of cash deposits. Therefore, we accept only a sum of ₹ 8.00 lakhs as a loan from her and the balance addition is confirmed. Addition on agricultural income - Held that - Assessee filed certain bills reflecting the sale of agricultural produce. None of the authorities below have verified the assessee s contention on this issue. In view of the same, we deem it fit and proper to remand the issue to the file of the AO with direction to look into the assessee s land holdings, the nature of the crops grown and whether they coincide with the sale bills filed by the assessee and reconsider the issue in accordance with the law.

Summary

Issues:
1. Dismissal of appeal by Commissioner of Income Tax (Appeals)
2. Addition of unexplained deposits in bank accounts
3. Addition of unexplained investments in various banks
4. Addition of amount received from father
5. Addition of low withdrawals
6. Addition of amount received from wife
7. Treatment of agricultural income as other income

Issue 1: Dismissal of appeal by Commissioner of Income Tax (Appeals)
The assessee appealed for the A.Y 2009-10, challenging the order of the Commissioner of Income Tax (Appeals)-V, Hyderabad, which dismissed the appeal as erroneous, illegal, and unsustainable in law. The dispute arose from unexplained deposits in the bank account, which the assessee claimed were from known sources. The Commissioner upheld the addition of various amounts as unexplained investments, citing lack of direct evidence and confirmation letters from the parties involved. The Tribunal allowed the appeal, considering the reasonable cause for not providing confirmation letters due to the assessee's arrest during the proceedings.

Issue 2: Addition of unexplained deposits in bank accounts
The Assessing Officer (AO) observed substantial cash and other deposits in the assessee's accounts during the relevant financial year. Despite the assessee's explanation that the deposits were from farmers for safekeeping, the AO added a significant amount as unexplained investment under section 69 of the Income Tax Act. The Commissioner affirmed this decision due to the absence of confirmation letters from the involved parties. However, the Tribunal admitted additional evidence, considering the reasonable cause for the delay in providing confirmation letters, and remanded the issue to the AO for verification.

Issue 3: Addition of unexplained investments in various banks
The AO treated certain deposits as unexplained investments under section 69 of the Act, leading to additions in the income returned. The Commissioner upheld these additions as the assessee failed to provide specific sources for the deposits. The Tribunal rejected the grounds of appeal related to these additions, as the sources for the cash deposits were not adequately explained by the assessee.

Issue 4: Addition of amount received from father
A sum received from the father was treated as income from other sources by the AO and confirmed by the Commissioner. However, the Tribunal accepted the contention that the transaction between father and son, with the father having sufficient resources, justified deleting the addition. Therefore, this ground of appeal was allowed.

Issue 5: Addition of low withdrawals
The AO estimated the personal expenses of the assessee and made an addition on account of low withdrawals, which was confirmed by the Commissioner. The Tribunal rejected the appeal related to this addition, as the assessee failed to provide evidence demonstrating that the withdrawn amount was sufficient for his standard of living.

Issue 6: Addition of amount received from wife
An amount allegedly received from the wife was disputed, with the assessee claiming it was from her known sources of income. The Tribunal accepted a portion of the amount as a loan from the wife based on her income tax return, while confirming the balance addition.

Issue 7: Treatment of agricultural income as other income
The assessee's claim of agricultural income was treated as other income without proper verification by the authorities. The Tribunal remanded this issue to the AO for a detailed examination of the assessee's land holdings, crops grown, and sale bills, to reconsider the issue in accordance with the law.

In conclusion, the Tribunal partly allowed the assessee's appeal for statistical purposes, addressing various issues related to unexplained deposits, investments, and additions to income from different sources, while remanding one issue back to the Assessing Officer for further assessment.