2022 (2) TMI 972 - AT - Income Tax

Addition u/s 68 - Unexplained cash deposit - AO did not accept the explanation of source of cash from Shri. Narayan Iyengar HUF - HELD THAT - AO disbelieved receipt of cash from the HUF on the ground that the income of HUF declared for Assessment Years 2016-17 and 2017-18 was not sufficient to prove the gift given by the HUF - AO also mentioned that the HUF did not respond to the notice by the AO u/s 133(6) which is not correct and a reply was filed by the HUF on 13.09.2019 reiterating the fact that the HUF has given cash as gratis. AO and CIT(A) in our opinion proceeded on the basis that the current year s income should have been more than ₹ 3 lakhs and only then the payment of cash to the assessee can be justified. In coming to this conclusion, they have ignored the fact that the HUF had declared income in the past and did not doubt the availability of accumulated cash from past savings - Addition of ₹ 3 lakhs being cash received from HUF cannot be sustained and the same is directed to be deleted. Upendranath has acknowledged having paid a sum of ₹ 5 lakhs to the assessee on 10.11.2016 by cash. Upendranath has been filing his Return of Income and the copy of Return of Income filed by him for Assessment Years 2016-17 to 2019-20 have been filed before the lower authorities. These facts have been overlooked by the Revenue authorities. Identity of Upendranath cannot be disputed because even in the ground of appeal raised by the assessee before the CIT(A), specific assertion was made by the assessee in reply to the notice issued by the AO u/s 142(1), the assessee has given all the details of Upendranath including his address and PAN number. These facts have not been considered by the AO or the CIT(A). Assessee has sufficiently established the identity, capacity and genuineness of the transactions and in the circumstances, the addition made cannot be sustained. The same is directed to be deleted. - Decided in favour of assessee.

Summary

Issues:
1. Addition of ?2 lakhs and ?5 lakhs under section 68 of the Income Tax Act 1961.

Analysis:
The judgment pertains to an appeal filed by an individual assessee against an order of the CIT(A) National Faceless Appeal Centre regarding the Assessment Year 2017-18. The primary issue in this case was the addition of ?2 lakhs and ?5 lakhs respectively under section 68 of the Income Tax Act 1961. The assessee had deposited a total of ?30 lakhs in cash in her bank account during the relevant year. The source of funds for most of the cash deposit was accepted by the Assessing Officer (AO), except for amounts received from a Hindu Undivided Family (HUF) and the assessee's brother. The AO disbelieved the explanations provided by the assessee for these amounts, leading to the additions.

Regarding the cash received from the HUF, the assessee provided a confirmation from the HUF and their income tax returns for the relevant years. The AO raised concerns about the adequacy of the HUF's income to support the cash gift given to the assessee. However, the Tribunal observed that the AO and CIT(A) failed to consider the HUF's past savings and income, leading to an incorrect conclusion. Consequently, the addition of ?3 lakhs from the HUF was directed to be deleted.

Concerning the cash received from the assessee's brother, the Tribunal noted that the brother had acknowledged the loan received from the assessee in a previous year. Despite the AO's doubts about the transaction, the Tribunal found that the assessee had provided sufficient evidence to establish the identity and genuineness of the transaction. Therefore, the addition of ?5 lakhs from the brother was also directed to be deleted. The Tribunal concluded that the assessee had adequately substantiated the transactions in question, leading to the allowance of the appeal.

In summary, the Tribunal overturned the additions made by the AO and CIT(A) regarding the cash received from the HUF and the assessee's brother. The Tribunal emphasized the importance of considering the past savings and income of the HUF and recognized the evidence provided by the assessee to support the transactions. Consequently, the appeal of the assessee was allowed, and the additions under section 68 of the Income Tax Act 1961 were deleted.