2020 (5) TMI 229 - AT - Income Tax

Addition on account of credits in bank account - Allegation that, assessee failed to discharge the burden of proof by not establishing the genuineness of credits in the bank account - CIT(A) deleted part addition considering the past savings - HELD THAT - CIT(A) considered the past savings but did not appreciate the explanation of the assessee that he was working in the Government Health Department since 02.9.1997 as an Assistant Surgeon and the credits are from the rotational fund - credit entries regarding the cancellation of DD purchased for share trading, clearing of cheque no.143176 and IDBI Infrastructure Bonds purchased by the assessee in earlier years have not been considered by the CIT(A), which is not justified because the assessee has explained the nature of credit entries. Direct the Assessing Officer to delete the addition on account of cash credits in bank account. Ground no.1 raised by the assessee is allowed. Addition on account of interest on FDR - HELD THAT - AO himself noted in the assessment order that FDRs relate to earlier years, therefore, find force in the contention of the assessee that the major part of interest earned on maturity value of FDRs pertains to previous years, which should not be added in the present year. Direct the AO to delete the addition in respect of interest earned on previous years and restrict the addition to the year under consideration if the same is not part of return of income for the present year. Accordingly, ground no.2 raised by the assessee is partly allowed. Addition on account of private practice - AO made addition noting that the assessee could not prove the credit entry made in the bank account - CIT(A) confirmed the same on the ground that the assessee is a Surgeon and receiving fees from private practice - HELD THAT - CIT(A) noted in the order that the assessee is a Surgeon and receiving fees from private practice. Perusal of assessment order and impugned orders shows that no corroborative evidence was brought on record by the Revenue Authorities in this regard. CIT(A) on presumptive basis sustained the addition, which is not justified. Thus, direct the AO to delete the addition. Unexplained investment in shares and mutual fund - CIT(A) held that the AO was not justified in making the addition of the income on account of profit on share trading pertaining to wife of the assessee - HELD THAT - Investment was not deleted on the ground that the initial burden was not discharged by the assessee. CIT(A) himself has considered the fact that the wife of the assessee has profit on share trading and accordingly deleted the addition, therefore, the initial burden had been discharged by the assessee. CIT(A) should also have deleted the addition on account of investment - direct the AO to delete the addition. Ground no.4 raised in the assessee s appeal is allowed.

Issues:
1. Challenge to addition of cash credits in bank account
2. Challenge to addition of interest on FDR
3. Challenge to addition on account of private practice
4. Challenge to addition of unexplained investment in shares and mutual fund

Issue 1: Challenge to addition of cash credits in bank account
The assessee challenged the addition of ?1,11,203 on account of credits in the bank account. The Assessing Officer made the additions due to the failure of the assessee to prove the genuineness of the credits. However, the ld. CIT(A) partially deleted the addition considering past savings. The assessee explained the credits as salary, interest income, share trading proceeds, and infrastructure bonds. The ITAT found that the ld. CIT(A) did not appreciate the explanations provided by the assessee. The ITAT directed the Assessing Officer to delete the addition as the assessee had adequately explained the nature of the credit entries.

Issue 2: Challenge to addition of interest on FDR
The Assessing Officer added ?1,97,545 as interest on Fixed Deposit Receipts (FDRs) to the total income of the assessee. The assessee contended that the interest earned on FDRs related to previous years and should not be added in the current year. The ITAT agreed with the assessee, noting that the major part of the interest earned pertained to previous years. The ITAT directed the Assessing Officer to delete the addition of interest earned on previous years and restrict the addition to the current year if not part of the return of income for that year.

Issue 3: Challenge to addition on account of private practice
The addition of ?50,000 on account of private practice was challenged by the assessee. The Assessing Officer added the amount, noting the lack of proof for the credit entry in the bank account. The ld. CIT(A) upheld the addition based on the presumption of the assessee's private practice. The ITAT found that no corroborative evidence was presented by the Revenue Authorities regarding the private practice. The ITAT directed the Assessing Officer to delete the addition of ?50,000 as it was sustained on a presumptive basis without sufficient justification.

Issue 4: Challenge to addition of unexplained investment in shares and mutual fund
The Assessing Officer added ?7,68,844 on account of unexplained investment in shares and mutual funds. The ld. CIT(A) confirmed the addition, stating that the initial burden of proof was not discharged by the assessee. The assessee argued that the amount was shown in the return of income of the wife, indicating the unjustified nature of the addition. The ITAT noted that the ld. CIT(A) had already deleted an addition related to the wife's profit on share trading, acknowledging the initial burden was discharged. Therefore, the ITAT directed the Assessing Officer to delete the addition of ?7,68,844 as the initial burden had been adequately discharged.

In conclusion, the ITAT partly allowed the appeal of the assessee, directing the Assessing Officer to delete the challenged additions based on the explanations provided and the lack of sufficient evidence to support the additions.

← Previous Next →