2018 (12) TMI 1559 - AT - Income Tax

Undisclosed income deposited/credited in undisclosed three bank accounts - Held that - AO had failed to examine the source of deposit on the basis of merit. It is not a matter whether the Bank accounts belong to the assessee or his HUF rather if the source of those deposits is explained no addition can be made in the case of the assessee as individual capacity or in the case of HUF. In the case in hand, the assessee has been able to explain the source of those deposits/credit entries during the assessment proceedings and meticulously before the appellate authority which was rightly taken into consideration which deleting addition by the CIT(A) as indicated by us hereinbefore. CIT(A) was pleased to direct the AO to examine the issue afresh regarding disallowance of deduction claimed by the HUF against the full value of consideration to compute the total income of HUF which makes the order complete and more reasonable. We, therefore find no infirmity in the order passed by the Learned CIT(A). The same is thus confirmed. - Decided against revenue.

Issues Involved:
1. Deletion of addition on account of undisclosed income deposited in three bank accounts.
2. Reliance on submissions not made available before the Assessing Officer (AO) in contravention of Rule 46A.
3. Lack of explanation for certain entries in the bank accounts.
4. Assessment of bank accounts as belonging to the individual and not the Hindu Undivided Family (HUF).

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Undisclosed Income Deposited in Three Bank Accounts:

The Revenue's appeal challenged the deletion of an addition of ?72,75,116/- by the Commissioner of Income Tax (Appeals) [CIT(A)], which was initially made by the AO on the grounds of undisclosed income in three bank accounts. The assessee had filed a return declaring an income of ?1,62,920/- and claimed that the bank accounts belonged to his HUF. The AO observed that no return was filed by the HUF and concluded that the bank accounts belonged to the individual, leading to an addition of ?73,63,945/-. The CIT(A) provided relief to the assessee, accepting the explanation that the deposits were from compensation received for land acquired by the government, which had already been taxed in the previous assessment year. The Tribunal upheld the CIT(A)'s order, finding no infirmity in the deletion of the addition.

2. Reliance on Submissions Not Made Available Before the AO in Contravention of Rule 46A:

The Revenue contended that the CIT(A) erred in relying on submissions that were not presented before the AO, violating Rule 46A. However, the Tribunal noted that the CIT(A) had thoroughly examined the sources of the deposits and found them to be explained. The CIT(A) had directed the AO to verify the deductions claimed by the HUF, ensuring a comprehensive review. The Tribunal found that the CIT(A) acted within its jurisdiction and upheld the order.

3. Lack of Explanation for Certain Entries in the Bank Accounts:

The AO had pointed out that some entries, such as those related to Babubhai N. Patel and RMP commission, were not adequately explained. The CIT(A) reviewed the explanations provided by the assessee, which included detailed transactions and sources of deposits. The Tribunal agreed with the CIT(A)'s finding that the assessee had sufficiently explained the credit entries, and the AO's method of summarily treating all deposits as unexplained was incorrect.

4. Assessment of Bank Accounts as Belonging to the Individual and Not the HUF:

The AO assessed the bank accounts as belonging to the individual, not the HUF, based on the signatures and lack of HUF returns. The CIT(A) and the Tribunal found that the source of the deposits was adequately explained, whether the accounts belonged to the individual or the HUF. The compensation amounts received for land acquisition were already taxed, and the CIT(A) directed the AO to re-examine the deductions claimed by the HUF. The Tribunal upheld the CIT(A)'s order, confirming that the source of deposits was explained, and no addition was warranted in the individual’s assessment.

Conclusion:

The Tribunal dismissed the Revenue's appeal, confirming the CIT(A)'s order that the source of deposits in the bank accounts was sufficiently explained, and no addition was justified. The Tribunal found that the CIT(A) had correctly directed the AO to re-examine the deductions claimed by the HUF, ensuring a thorough review of the case. The order was pronounced in open court on 20/12/2018.

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