2021 (6) TMI 97 - AT - Income Tax

Additions on account of cash deposited in bank account - Assessee explained source deposited in the bank to be out of gifts - father of the assessee has not made gifts in cheque and has made the gift in cash - HELD THAT - During the course of assessment proceedings, the assessee has filed the affidavits of the donors who are parents, brother and spouse, respectively. They are not outsiders or unknown persons. No independent inquiry whatsoever was conducted by the AO either u/s 133 (6) or 131(1) of the Act. Since the gifts in the instant case are received from parents, brother and spouse, respectively and the father has withdrawn substantial cash amount from the bank before giving the gift on various dates to his son and the gifts from brother, from mother and from spouse are not huge amounts, therefore, doubting the genuineness of such gifts received from blood relations is not justified. We accordingly accept the source deposited in the bank to be out of gifts. Thus, in nutshell, as against the addition made by the AO and sustained by the CIT(A), an amount of ₹ 49,85,000/- is accepted as explained. The order of the CIT(A) is modified to this extent and the ground raised by the assessee is partly allowed. Additions on account of rental income - HELD THAT - We find the assessee has shown to have received an amount as rent in respect of gym equipments given on hire to NIIT Ltd. We find, the AO in the order passed u/s 144 of the Act has made an addition after allowing 30% deduction from the rent u/s 24 of the Act. Since the assessee does not have any house property to let out and the rental income was received out of gym equipments given on hire to NIIT Ltd., therefore, the addition made by the AO and sustained by the CIT(A) is not justified. Accordingly, the order of the CIT(A) sustaining the addition is set aside and the ground raised by the assessee on this issue is allowed. Additions on account of professional income - HELD THAT - As the professional income has not been doubted by the lower authorities. Since the assessee undoubtedly, is a gym trainer and has received rental income from hiring of gym equipments as well as professional income as a trainer, the various expenses claimed by the assessee cannot be denied completely. At the same time, in absence of sufficient documentary evidences to the satisfaction of the lower authorities as the claim of expenses of various kind cannot be accepted in full. Considering the totality of the facts, we are of the considered opinion that disallowance on estimate basis out of the various expenses shown at ₹ 5,29,355/- will meet the ends of justice.

Summary

Issues Involved:
1. Addition of ?50,40,000/- on account of cash deposited in the bank account.
2. Addition of ?2,31,000/- on account of rental income.
3. Addition of ?4,20,000/- on account of professional income.

Detailed Analysis:

1. Addition of ?50,40,000/- on Account of Cash Deposited in the Bank Account:
The Assessing Officer (AO) made an addition of ?50,40,000/- due to non-submission of details during the assessment proceedings. The assessee explained that the deposits were from an opening cash balance of ?5,55,000/-, cash withdrawn from the bank amounting to ?41,15,000/-, and gifts received from family members totaling ?9,25,000/-. The Commissioner of Income Tax (Appeals) [CIT(A)] rejected the opening cash balance due to its non-disclosure in the previous year's return and doubted the genuineness of the gifts.

Upon review, the Tribunal accepted the assessee's argument that there is no legal requirement to show cash in hand in the return of income. However, due to the lack of evidence, only ?5,00,000/- of the opening cash balance was accepted as explained, adding ?55,000/- as unexplained cash. The Tribunal also accepted the cash withdrawals of ?36,39,000/- as re-deposited, as there was no evidence from the Department that the money was spent elsewhere. Regarding the gifts, the Tribunal found that the gifts from family members were genuine and properly documented, thus accepting the source of ?9,25,000/-. Consequently, the Tribunal modified the addition to ?55,000/- as unexplained cash.

2. Addition of ?2,31,000/- on Account of Rental Income:
The AO added ?2,31,000/- after allowing a 30% deduction from the rental income of ?3,30,000/- under Section 24 of the Income Tax Act, treating it as income from house property. The assessee contended that the rental income was from gym equipment given on hire, not from house property.

The Tribunal found that the AO incorrectly treated the rental income from gym equipment as income from house property. Since the rental income was from equipment hire, the Tribunal set aside the addition of ?2,31,000/-, allowing the assessee's claim.

3. Addition of ?4,20,000/- on Account of Professional Income:
The AO added ?4,20,000/- as professional income without allowing any expenses claimed by the assessee, which included rental income from gym equipment and professional fees totaling ?7,50,000/-.

The Tribunal noted that the professional income was not doubted by the lower authorities. However, due to insufficient documentary evidence, the Tribunal did not accept the full claim of expenses amounting to ?5,29,355/-. Instead, it allowed an estimated disallowance of ?53,000/- out of the expenses, reducing the addition from ?4,20,000/- to ?53,000/-.

Conclusion:
The appeal filed by the assessee was partly allowed. The Tribunal modified the addition on account of cash deposits to ?55,000/-, set aside the addition of ?2,31,000/- on account of rental income, and reduced the addition on account of professional income to ?53,000/-.