2021 (7) TMI 683 - AT - Income Tax

Addition u/s 68 - security deposit - HELD THAT - AR as well as DR and perusal of orders of the authorities below it is noted that neither Assessing Officer nor the CIT(A) has tried to verify this fact whether security deposit shown from one Shri Raj Bahadur is actual pertains to the financial year 1995-96 or not. If the said deposit is old one and there is no fresh deposit during the year under consideration then this issue does not arise for the year under consideration. Since the authorities below have not verified this fact and the identical issue is pending adjudication before the CIT(A) for the A.Y. 1992-93 to 1998-99 therefore, this issue is also set aside to the record of the CIT(A) of fresh adjudication after giving an opportunity of hearing to the assessee and conducting a proper enquiry regarding the fact whether it pertains to the financial year 1995-96 or not. CIT(A) is directed to adjudicate the matter within the period of 90 days from receipt of this order. - Appeal filed by the assessee is allowed for statistical purposes.

Summary

Issues:
1. Disallowance of interest on deposits and addition of security deposit treated as cash credit under section 68 of the Income Tax Act, 1961.

Analysis:

1. Disallowance of Interest on Deposits:
The appellant contested the disallowance of interest amounting to &8377;77,167 on deposits, previously treated as unexplained cash credit by the Assessing Officer for the years 1992-1998. The Tribunal had set aside this issue for fresh adjudication by the CIT(A) in earlier orders. The appellant argued that the CIT(A) had not finalized the matter despite the Tribunal's directions. The appellant's representative claimed non-cooperation from the appellant in the reconstruction of records. The Tribunal noted that the disallowance of interest was consequential to the issue of cash credit additions, which were pending adjudication before the CIT(A) for the mentioned years. Consequently, the Tribunal set aside the disallowance of interest for fresh adjudication by the CIT(A) within 90 days.

2. Addition of Security Deposit as Cash Credit:
Regarding the addition of &8377;95,000 as a security deposit treated as undisclosed income under section 68 of the IT Act, the appellant argued that this deposit was from a previous year, 1995-96, and not a fresh deposit in the year under consideration. However, neither the Assessing Officer nor the CIT(A) verified this claim. The Tribunal directed the CIT(A) to conduct a proper inquiry to ascertain the veracity of the appellant's claim within 90 days. As the issue was pending adjudication for previous assessment years, the Tribunal set aside this issue for fresh adjudication.

In conclusion, the Tribunal allowed the appeal for statistical purposes, emphasizing the need for timely adjudication and proper verification of facts by the CIT(A) for both issues raised by the appellant.