2023 (3) TMI 1034 - AT - Income Tax

Assessment u/s 153A - existence of incriminating material / evidence found from the possession of appellant - time period for summary assessment under section 143(1) and for notice under section 143(2) - HELD THAT - CIT(A) makes correct observation that the limitation to issue notice u/s 143(2) of Act was available and before that the search was conducted, so the assessment cannot be considered to be completed assessment. Ld. CIT(A) is right in aforesaid conclusions, as the time period for summary assessment under section 143(1) and for notice under section 143(2) of Act had not lapsed, so it is a case of pending assessment, which gets merged with assessment u/s 153A. Hence the principles laid down in Kabul Chawla case 2015 (9) TMI 80 - DELHI HIGH COURT with regard assessment u/s 153A of Act have to be on basis of incriminating material found during search in case of completed assessment, do not benefit assessee. Therefore, this ground is decided against the assessee. Addition u/s 69A - Cash gifts receipts unexplained - HELD THAT - Bench is of considered opinion that the cash/monetary gifts on the occasion referred by the assessee are either customary or out of token of love and affection and intended to be in lieu of material gifts reasonably given on the occasion or as good omen (shagun). These cash gifts, unlike Pin Money are a little something or spending money to be spent on trivial needs or to create a memory of the event and cash gift itself. When an assessee deposits these collected amounts of cash gifts in bank, and thus creates a capital or investment out of these cash gifts, the assessee is expected under law to offer a reasonable explanation of the sources and justification of the occasions and the relationships, to have received heavy denomination cash gifts or beyond threshold limits. Further that under what circumstances these cash gift amount got accumulated over the period, so as to be deposited a lump sum, in particular FY. In the case in hand there is nothing factual or substantial to disagree with the reasons of CIT(A). The burden was on assessee to give satisfactory explanation for the purpose of Section 69A - Assessee certainly failed to bring forth evidence sufficient discharge that burden. So the Ld. CIT(A) was justified to sustain the addition - Decided against assessee.

Summary

Issues:
1. Addition on account of unexplained cash deposit under section 69A
2. Addition on account of unexplained money credit under section 69A
3. Interpretation of provisions related to gifts received from relatives under section 56(2)(vii)
4. Applicability of judgment in Kabul Chawla case to assessment under section 153A

Issue 1: Addition on account of unexplained cash deposit under section 69A

The appellant claimed that cash deposits in her bank account were gifts received from relatives and thus exempt from tax under section 56 of the Income Tax Act. However, the Assessing Officer (AO) considered the explanation as an afterthought and treated the cash as unexplained. The Commissioner of Income Tax (Appeals) deleted an addition made by the AO concerning a credit entry, but the appellant's grounds challenging the addition of Rs. 3,50,000 were dismissed. The Tribunal upheld the CIT(A)'s decision, emphasizing the burden on the assessee to provide satisfactory explanations under Section 69A, which the appellant failed to discharge. The Tribunal found no reason to interfere with the CIT(A)'s decision, leading to the dismissal of the appeal.

Issue 2: Addition on account of unexplained money credit under section 69A

The appellant was asked to explain a credit entry of Rs. 34,50,000 in her bank statement, which was related to a specific transaction. The AO's addition on this account was deleted by the CIT(A). The Tribunal did not find any fault with the CIT(A)'s decision in this regard, indicating that the deletion of the addition was justified based on the available evidence and arguments presented during the assessment proceedings.

Issue 3: Interpretation of provisions related to gifts received from relatives under section 56(2)(vii)

The appellant argued that the gifts received from relatives were not taxable under section 56(2)(vii) of the Act. However, the Tribunal noted that the burden was on the assessee to provide documentary evidence supporting the receipt of these gifts, including details like gift deeds, donors' information, and their relationship with the appellant. The Tribunal agreed with the CIT(A)'s reasoning that the appellant failed to provide sufficient evidence to substantiate the sources of cash deposits in her bank account. The Tribunal emphasized the need for the assessee to offer a reasonable explanation for the accumulation and deposit of cash gifts, especially when converting them into capital or investments. Consequently, the Tribunal upheld the CIT(A)'s decision to sustain the addition, as the appellant failed to meet the burden of proof required under Section 69A.

Issue 4: Applicability of judgment in Kabul Chawla case to assessment under section 153A

The appellant contended that the assessment under section 153A should be based on incriminating material found during the search, citing the judgment in Kabul Chawla case. However, the Tribunal observed that the assessment for the relevant year was not completed at the time of the search, as the notice under section 143(2) could still be issued. The Tribunal agreed with the CIT(A)'s conclusion that the assessment was pending and would merge with the assessment under section 153A. Therefore, the principles laid down in the Kabul Chawla case did not apply in this scenario, leading to the dismissal of the appellant's grounds related to this issue.

In conclusion, the Tribunal dismissed the appellant's appeal, upholding the additions made by the AO and CIT(A) regarding unexplained cash deposits and money credits. The Tribunal emphasized the importance of providing satisfactory explanations and supporting evidence in tax assessments, especially concerning gifts received from relatives. Additionally, the Tribunal clarified the applicability of legal judgments in determining the assessment process under different sections of the Income Tax Act.