2022 (2) TMI 170 - AT - Income Tax

Addition u/s 69 - deposits made in the regular bank account of the brother of the assessee who is separately assessed to tax - HELD THAT - During the course of the assessment proceedings, the assessee filed an affidavit stating that he is one of the co-owner in the account along with his brother which is only for the sake of convenience and all the funds and the transactions in the said bank account belongs to his brother, who has confirmed all the said transactions in his bank account. Thereafter, the assessing officer without properly appreciating the aforesaid facts has made an addition in the hands of assessee, of entire deposits made in the bank account of the brother of the assessee, which is absolutely erroneous. Assessee has submitted books of accounts of his brother and submitted affidavit also - AO has not made any adverse finding in any of these documents even, though all the details were furnished by the assessee before him. AO ought to have examined all these details and refuted / rejected them, with a cogent adverse findings and discernable line of reasoning, in order to arrive at a conclusion. AO has just brushed aside these evidences without even a word on why they are not acceptable. It is a well settled Law that when an assessee has all the possible evidence in support of its claim, they cannot be brushed aside based on surmises. Therefore, based on this factual position we delete the addition made by the assessing officer. Thus, ground no.1 raised by the assessee is allowed. Addition u/s 68 - maturity proceeds of FDRs, alleging unexplained cash credits - HELD THAT - Learned Counsel submits that aforesaid FDRs at Sr. Nos. 1 to 4 were made by the assessee, his wife and the brother of the assessee before the commencement of the current assessment year i.e. well before 01-04- 2007 and thus, these FRD were not made during the assessment year under consideration. In this regard, assessee submits a copy of the bank certificates issued by the Dena Bank evidencing the fact that the said FDRs were not made during the current year but were made in the earlier years. Since the investments in the FDRs were not made during the year under consideration, the question of taxing the same alleging it as unexplained cash credit does not arise and hence, based on this factual position we delete the addition. Addition in respect of investment in Mutual Funds - HELD THAT - As ld Counsel submits that Investments in mutual funds each vide account Nos. 42652075101 and 42677326502 belonging to the assessee and his brother and referred to by the assessing officer gets fully accounted for in the regular books of account of the assessee and his brother. The assessee submitted before assessing officer, the relevant bank statement and the ledger account of investment in mutual fund reflecting the impugned investments. We note that assessing officer did not find any defect in these evidences. Hence the impugned investments should not be treated unexplained, therefore, we delete the addition. The ground raised by the assessee is allowed.

Issues involved:
1. Addition under section 69 of the Income Tax Act for deposits in brother's bank account
2. Addition under section 68 for maturity proceeds of FDRs and cash deposits
3. Addition for investments in mutual funds

Issue 1: Addition under section 69 of the Income Tax Act for deposits in brother's bank account

The appeal was against an order confirming an addition of ?19,28,000 under section 69 of the Act for deposits in the brother's bank account. The Assessing Officer observed unexplained cash deposits and interest in the account. The CIT(A) upheld this addition. However, the Tribunal noted that the account belonged to the brother, and all transactions were accounted for in his books. The AO did not provide a valid reason for disregarding the evidence submitted by the assessee. As the evidence supported the claim, the Tribunal deleted the addition.

Issue 2: Addition under section 68 for maturity proceeds of FDRs and cash deposits

The AO added ?7,93,390 as maturity proceeds of FDRs, alleging unexplained cash credits. The assessee explained the FDRs belonged to the wife and brother, made before the current assessment year. The Tribunal found the FDRs were not made during the current year, based on bank certificates. Hence, the addition was deleted. Additionally, an investment of ?3,00,000 in Reliance Mutual Funds was questioned. The Tribunal noted the investments were properly accounted for in the books of the assessee and his brother, supported by bank statements and ledger accounts. As the AO did not find any issues with the evidence, the Tribunal deleted this addition as well.

Issue 3: Addition for investments in mutual funds

The AO questioned investments of ?3,00,000 in Reliance Mutual Funds. The Tribunal found the investments were accounted for in the books of the assessee and his brother. The evidence provided, including bank statements and ledger accounts, supported the legitimacy of the investments. As the AO did not find any faults with the evidence, the Tribunal deleted this addition. Therefore, the appeals on both issues 2 and 3 were allowed.

In conclusion, the Tribunal allowed the appeal of the assessee, deleting the additions made by the Assessing Officer under sections 69 and 68 of the Income Tax Act for deposits in the brother's bank account, maturity proceeds of FDRs, and investments in mutual funds. The Tribunal found the evidence provided by the assessee to be sufficient to support their claims, leading to the deletions of the additions.

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