2024 (10) TMI 358 - AT - Income Tax

Determination of total income as NIL - Discrepancies in income declared by the assessee and additions made by the AO - Addition of based on cash deposits in joint bank accounts - Acceptance of capital account copies as evidence - HELD THAT - The said action of the AO is against the Circular No.549 dated 31-10-1989 issued by CBDT, wherein it is stated that the assessed income should not be less than the returned income. The Hon ble Gujarat High Court has held in the case of Gujarat Gas Co. 2000 (4) TMI 19 - GUJARAT HIGH COURT that the above said Circular issued by CBDT is binding upon the Assessing Officers. Accordingly, the AO was not justified in determining the assessed income as NIL in AY. 2011-12. Since the AO did not find fault in the capital account submitted by the assessee for this year, in our view, the same is required to be accepted. Accordingly, we set aside the order passed by the CIT(A) in AY. 2011-12 and direct the AO to accept the income returned by the assessee and also the capital account filed for that year. Addition u/s 68 - AO did not reopen the assessments of AYs. 2012-13, 2013-14 and 2015-16. In the capital account relating to AY. 2014-15, the assessee has shown receipt of gift from her elder son. CIT(A) has referred to the same and has disbelieved the same. We notice that the assessee has filed confirmation letter obtained from the son of the assessee, wherein he has confirmed that he has given gift of Rs. 3.00 lakhs to the assessee. In that letter, he has furnished his PAN number also. We noticed earlier that the bank accounts stand in the joint name of the assessee and her sons. Hence, the contribution made by the son for making cash deposit has been declared as gift. Hence, we do not find any reason to disbelieve the gift transaction. Assessee has shown opening cash balance of Rs. 15.34 lakhs as on 01-4-2014 out of which it is claimed that a sum of Rs. 10.00 lakhs has been deposited into the bank account. The closing balance as on 31-03-2015 was shown at Rs. 7,67,200/-. The above said amount constituted opening cash balance as on 01-04-2015 and in the year relevant to AY. 2016-17, the assessee has declared income of Rs. 2,90,000/- and the same has been accepted by the AO. The AO also did not make any addition of cash gifts of Rs. 45,600/- shown by the assessee. All these three amounts explain the sources of deposit of Rs. 10.00 lakhs made in the year relevant to AY. 2016-17. Accordingly, we are of the view that the assessee has explained the sources for making deposits - direct the AO to delete the addition made in those two years. Decided in favour of assessee.

Summary

Issues:
Reopening of assessments for AYs 2011-12, 2015-16, and 2016-17 based on cash deposits in joint bank accounts. Discrepancies in income declared by the assessee and additions made by the Assessing Officer. Acceptance of capital account copies as evidence. Treatment of cash deposits as unexplained income. Discrepancies in the treatment of gifts received.

Analysis:
The Appellate Tribunal ITAT Mumbai addressed three appeals filed by the assessee against orders from the Ld.Addl/JCIT(A)-3, Delhi for AYs 2011-12, 2015-16, and 2016-17. The assessee, an individual, had cash deposits in joint bank accounts with his sons, prompting the AO to reopen assessments. The AO added the deposit amounts as unexplained income for AYs 2015-16 and 2016-17, while determining the total income as NIL for AY 2011-12 due to non-acceptance of declared income.

The assessee contended that the cash deposits were from savings and gifts, supported by capital account copies. However, the Ld.CIT(A) rejected these explanations, misinterpreting the capital account as a cash flow statement. The Tribunal noted discrepancies in the AO's actions, citing Circular No.549 and a Gujarat High Court case to assert that assessed income should not be less than returned income. Consequently, the Tribunal directed the AO to accept the returned income and capital account for AY 2011-12.

Regarding gifts and cash deposits in subsequent years, the Tribunal found the son's gift confirmation letter credible, supporting the gift transactions. The Tribunal also accepted the explanation for the sources of cash deposits in AYs 2015-16 and 2016-17, based on opening balances and declared incomes. As a result, the Tribunal allowed all three appeals filed by the assessee, overturning the Ld.CIT(A)'s orders for AYs 2011-12, 2015-16, and 2016-17.

In conclusion, the Tribunal's detailed analysis and application of legal principles, including relevant circulars and case law, led to the favorable outcome for the assessee in challenging the additions made by the AO and the Ld.CIT(A). The judgment emphasized the importance of correctly interpreting financial documents and providing sufficient evidence to support income sources, ultimately resulting in the allowance of the appeals and the deletion of the additions made by the lower authorities.