2022 (2) TMI 79 - AT - Income Tax

Nature of income - Cash deposit - income was declared in the return in response to notice u/s 147/148 - addition u/s 68 AND unexplained investment u/s 69 - Assessee filled return pursuant to notice u/s 148 and suo motu offered additional income - HELD THAT - The assessee earlier filed revised return, which was declared as non est. Thereafter, the assessee again filed a return pursuant to notice u/s 148 and suo motu offered additional income. Once the income was offered in the return, the same could not have been treated as cash credit u/s 68 or unexplained investment u/s 69 - The position would have been different if the assessee had not offered additional income in his return and the AO had made the addition. That case would have justified roping in of sections 68 or 69 etc. Since the assessee admittedly offered the income in his return pursuant to notice u/s 148 of the Act, which has been accepted by the AO as such, in my considered opinion, the ld. CIT(A) was not justified in countenancing the action of AO in treating additional income as unexplained cash credit or unexplained investment attracting sections 68 or 69 of the Act and consequently charging higher rate of taxation. Therefore, set aside the impugned order and order to delete the addition. - Decided in favour of assessee.

Summary

Issues:
Appeals arising from separate orders by CIT(A) for assessment year 2011-12 - Validity of re-assessment proceedings - Treatment of cash deposits as unexplained income under sections 68 and 69 of the Income-tax Act, 1961.

Analysis:
In the first appeal, the assessee, an individual, initially declared a total income of &8377; 1,73,077 from tuitions and accounts writing. Subsequently, re-assessment proceedings were initiated due to cash deposits of &8377; 1,41,01,500 in joint savings bank accounts. The assessee revised the return, offering &8377; 47,00,500 as a share of the cash deposits. However, the AO treated the revised return as invalid and issued a notice under section 148. The assessee then filed another return, declaring the same income but was taxed at a higher rate under section 68. The CIT(A) upheld the assessment. The ITAT Pune Vice President ruled that since the assessee voluntarily offered the additional income in response to the notice under section 148, it could not be treated as unexplained income under sections 68 or 69. The impugned order was set aside, and the addition was deleted.

In the second appeal by another joint account holder, similar facts emerged. The AO accepted the income declared in response to the notice under section 148 but taxed it under section 68. The CIT(A) upheld the assessment, leading to the appeal. The ITAT Pune Vice President, following the previous decision, ordered the deletion of the addition, as the income voluntarily declared in response to the notice under section 148 could not be treated as unexplained income under sections 68 or 69. Both appeals were allowed, and the impugned orders were set aside.

The ITAT Pune, in both cases, emphasized that when an assessee voluntarily offers additional income in response to a notice under section 148, it cannot be treated as unexplained income under sections 68 or 69. The Vice President held that the CIT(A) erred in upholding the AO's decision to tax the voluntarily declared income at a higher rate. The judgments underscored the importance of the assessee's proactive declaration and rejected the application of sections 68 and 69 in such circumstances.