2017 (5) TMI 357 - AT - Income Tax

Undisclosed income U/s 69 - unexplained source of cash deposits made in the bank account - Assessee has a Joint account with his father - Held that - In the present case, in the paper book filed by the assessee, it was clear from the documentary evidence that at the relevant time, the assessee was a student of ICFAI University, Dehradun and had no source of income. The bank account details filed clearly shows that both the accounts, one was the joint account with his father and another was with the mother of the assessee. From taking guidance of the case of CIT Vs. Smt. P.K. Noorjahan (1997 (1) TMI 6 - SUPREME Court) the question whether source of investment should be treated as income U/s 69 has to be considered in the light of the facts of each case. A discretion has been conferred on the ITO U/s 69 of the Act to treat the source of investment as income of the assessee if the explanation offered by the assessee is not found satisfactory. However, the said discretion should be exercised keeping in view the facts and circumstances of a particular case. when it is claimed that the assessee could not possibly have any source of income, the addition on his hand is not justified within the parameters of the Income Tax Act. If at all, the additions could have been made, it could have been done either in the hands of the father or the mother of the assessee, therefore, we arrive at our considered view that the findings of the ld. CIT(A) are hereby reversed and we direct the deletion of entire addition U/s 69 from the hands of the assessee. - Decided in favour of assessee

Summary

Issues:
Appeal against addition of undisclosed income under section 69 of the Income Tax Act, 1961.

Analysis:
1. The appeal was filed by the assessee challenging the addition of ?3,21,000 as undisclosed income under section 69 of the IT Act for the assessment year 2008-09. The assessee, a student pursuing an MBA, explained that the investment in UTI Mutual Fund was made from the sale proceeds of agricultural land by his mother. The AO observed cash deposits in the bank account jointly held by the assessee and his father, attributing it to unexplained income.

2. The assessee contended before the CIT(A) that the cash deposits were related to the sale of agricultural land by his mother and were utilized for investments. However, the CIT(A) upheld the addition, stating the assessee failed to provide satisfactory proof for the cash deposits. The CIT(A) found the written submissions lacking documentary evidence to substantiate the explanation, leading to the confirmation of the addition.

3. The assessee further appealed, emphasizing that the joint bank account with his father received the cash deposits, and he had no income source being a student. The funds were traced back to the sale proceeds of the agricultural land by his mother. Citing the case of CIT Vs. Smt. P.K. Noorjahan, the assessee argued that the addition was unjustified, as he was not the beneficiary of the deposited amount.

4. Upon thorough examination, the Tribunal referred to the case law and noted that the discretion under section 69 of the Act allows the assessing officer to treat the source of investment as income based on the explanation provided. Considering the student status of the assessee and the source of funds from the sale of land, the Tribunal concluded that the addition was unwarranted. The Tribunal directed the deletion of the entire addition of ?3,21,000 under section 69 of the Act from the assessee's hands, reversing the CIT(A)'s decision.

5. The Tribunal allowed the appeal, highlighting that the addition was not justified given the circumstances and the lack of income sources for the student assessee. The decision was based on the discretion provided under section 69 and the specific facts of the case, leading to the reversal of the addition made by the assessing officer and upheld by the CIT(A).