2023 (1) TMI 271 - AT - Income Tax

Undisclosed cash deposits made in its bank account - cash deposited in the undisclosed bank account - deduction/set off of unrecorded expenses - undisclosed and unexplained receipts which were deemed to be the income of the assessee u/s 69A - HELD THAT - CIT(A) while adjudicating appeal has already allowed deduction/set off of unrecorded expenses to the tune of 40% of undisclosed professional receipts , to be set off against undeclared professional receipt of Rs. 65,15,836/-which means that undisclosed/unrecorded expenses to the tune of Rs. 26,06,334/- were allowed by ld. CIT(A) to be set off against undisclosed professional receipt of Rs.65,15,836/- , while at the most the assessee has cash availability of Rs. 6,00,000/- during the year under consideration (being cash withdrawn from the undisclosed bank account) to meet unrecorded/undisclosed expenses to be set off against undisclosed professional receipts and for that too also no details/evidences for such expenses have been submitted by the assessee on which the onus lay.Thus, the ld. CIT(A) was more than reasonable/lenient in allowing 40% of undisclosed professional receipts as deduction towards undisclosed/unrecorded expenses , from undisclosed professional receipts. The assessee has also claimed that some of the expenses were paid in next year such as fee of juniors, although no evidence is brought on record by assessee , while the onus was squarely on the assessee to have brought evidence on record. Thus, in our considered view already an extremely liberal view has been taken by ld. CIT(A) in granting part relief to the assessee as above and no further relief can be granted to the assessee keeping in view the facts and circumstances of the case as there is no availability of funds/cash to meet any further unrecorded expenses, and hence the appeal filed by the assessee stands dismissed. Interest income credited by SBI In assessee s undisclosed bank account maintained with SBI, High Court Branch, Allahabad , which was not offered to tax by the assessee, while filing return of income - We do not find any error in the orders of authorities below in bringing to tax said interest income in the hands of the assessee , as the said bank account pertains to the assessee and the assessee never offered such bank interest to tax in the return of income filed with the department, thus, we uphold this additions as were confirmed by ld. CIT(A). While dismissing the appeal filed by the assessee, we note that the Revenue did not came in appeal before tribunal against the part relief granted by ld. CIT(A) nor any Cross objections were filed by Revenue. Thus, this appeal filed by the assessee fails

Issues Involved:

1. Legitimacy of cash deposits in the assessee's bank account.
2. Treatment of cash receipts from the assessee's wife and relatives.
3. Classification of agricultural income.
4. Allowance of professional expenses.
5. Interest income not declared to the department.

Issue-wise Detailed Analysis:

1. Legitimacy of Cash Deposits:
The assessee deposited Rs. 31,86,420/- in cash in an undisclosed bank account. The AO invoked Section 69A of the Income-tax Act, 1961, treating the deposits as undisclosed professional income. The assessee claimed these were professional receipts and sought a deduction for professional expenses. The CIT(A) allowed a 40% deduction for expenses and taxed the remaining 60% as income. The Tribunal upheld this decision, noting that the assessee failed to substantiate the source of these deposits.

2. Treatment of Cash Receipts from Wife and Relatives:
The assessee credited Rs. 12,00,000/- from his wife and Rs. 19,50,000/- as gifts from relatives to his capital account. The AO added these amounts to the assessee's income under Section 68, as the assessee could not prove the creditworthiness or genuineness of these transactions. The CIT(A) treated these amounts as professional receipts, allowing a 40% deduction for expenses. The Tribunal upheld this treatment, noting the lack of evidence to substantiate the claims.

3. Classification of Agricultural Income:
The assessee declared Rs. 2,00,000/- as agricultural income. The AO reclassified this as professional income under Section 68, as the assessee could not provide evidence of ownership or agricultural operations. The CIT(A) upheld this reclassification, allowing a 40% deduction for expenses. The Tribunal agreed, citing the absence of proof for agricultural activities.

4. Allowance of Professional Expenses:
The assessee argued for a 60% deduction for professional expenses against the undisclosed receipts. The CIT(A) allowed a 40% deduction based on the ratio of declared expenses to declared professional receipts. The Tribunal found this allowance reasonable and dismissed the assessee's appeal for a higher deduction, noting the lack of evidence for additional expenses.

5. Interest Income Not Declared:
The AO added Rs. 58,498/- credited as interest in the undisclosed bank account to the assessee's income, as it was not declared in the return. The CIT(A) upheld this addition, and the Tribunal agreed, affirming the correctness of taxing this undisclosed interest income.

Conclusion:
The Tribunal dismissed the assessee's appeal, upholding the CIT(A)'s decision to treat the cash deposits, receipts from wife and relatives, and alleged agricultural income as professional receipts with a 40% deduction for expenses. The interest income from the undisclosed bank account was also correctly added to the assessee's income. The Tribunal emphasized the lack of evidence provided by the assessee to substantiate his claims.

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