2016 (7) TMI 14 - AT - Income Tax

Addition u/s 68 - amount claimed by the assessee as received from his mother-in-law - Held that - Source of cash deposit has been explained by the assessee as business receipt, but it was not accepted by the AO. It is pertinent to note that the AO considered only deposit side of the bank account without considering the withdrawal. Further when the AO accepted the gross receipt from the business of studio, then to that extent the deposit in bank account can be considered as explained source if the expenditure incurred by the assessee from the corresponding withdrawal from the bank. Therefore this aspect of deposit and withdrawal in the bank account has not been examined by the authorities below. Accordingly we set aside this issue to the record of AO to examine the same afresh by considering the deposit as well as explaining the withdrawals by matching the same with the business receipts and business expenditure of the assessee. As regards the gift received from the mother-in-law, it is found that the source was explained as sale of agricultural land for a consideration of ₹ 10 lakhs. However, in the sale deed the consideration is stated to be only ₹ 2,20,000/-. Though the assessee produced confirmation of the purchaser of the agricultural land regarding the consideration of ₹ 10 lakhs vide agreement dt.21.01.2008, the said confirmation was not accepted by the CIT (A) on the ground that it was not produced before the AO. Apart from the confirmation of the purchaser of the agricultural land, the assessee also produced the declaration of the mother-in-law, father-in-law and other relatives regarding the gift of ₹ 7 lakhs given by the mother-in-law. Genuineness of the agreement has not been examined by the AO. Further the AO has also not examined the parties to the transaction to verify the claim of the assessee and rejected the claim at the threshold. Therefore in the facts and circumstances of the case, this issue is set aside to the record of the AO to conduct a proper enquiry and verification by examining the concerned parties to the transaction and then decide the issue after giving an opportunity of hearing to the assessee. - Decided in favour of assessee for statistical purpose.

Summary

Issues:
1. Unexplained cash credit in bank account
2. Treatment of cash gift from mother-in-law as unexplained investment

Analysis:

Issue 1: Unexplained cash credit in bank account
The assessee purchased a property and explained the source of funds as a loan from Dewan Housing Finance Ltd and a cash gift from the mother-in-law. However, the Assessing Officer (AO) treated a cash deposit in the bank account as unexplained under section 68 of the Income Tax Act. The AO did not consider the business receipts of the assessee, leading to the addition of the cash deposit as unexplained income. The Appellate Tribunal found that the AO failed to consider the gross receipts available with the assessee and overlooked the business income declared by the assessee. The Tribunal directed the AO to re-examine the issue by considering both the deposits and withdrawals in the bank account, matching them with the business receipts and expenditures to determine the actual source of the cash deposit.

Issue 2: Treatment of cash gift from mother-in-law as unexplained investment
The AO rejected the explanation of the source of funds claimed by the assessee as received from the mother-in-law, treating it as unexplained investment. The Appellate Tribunal observed that the source of the cash gift from the mother-in-law was explained as the sale proceeds of agricultural land. However, discrepancies were noted in the sale deed regarding the consideration amount. The Tribunal found that the confirmation of the purchaser regarding the sale consideration was not accepted by the CIT (A) due to non-submission before the AO. Additionally, the genuineness of the agreement and the parties involved were not adequately examined by the AO. Consequently, the Tribunal set aside this issue for the AO to conduct a thorough investigation, verify the transaction parties, and make a decision after providing the assessee with an opportunity for a hearing.

In conclusion, the Appellate Tribunal allowed the appeal of the assessee for statistical purposes, directing a re-examination of both issues related to the unexplained cash credit in the bank account and the treatment of the cash gift from the mother-in-law as unexplained investment.