2016 (8) TMI 18 - AT - Income Tax

Unexplained cash deposits - Held that - There is a case where husband and wife are having joint bank a/c, bank statement and accounts were produced before us and even the bank statement regarding the relevant transactions were also brought in before us which are already on record. The assessee s husband has categorically stated through affidavit and confirmation letter filed before the CIT (A) that he is earning income from rice business and that he is having a joint a/c with his wife the assessee here in SBI A/c No.30588257363 with the SBI Kukatapally Temple Branch. We have noticed that the Bank a/c indicates that the deposits are by Sri K. Basavaiah also and payments are for Rice purchase. This indicates that the entire cash deposit of ₹ 48,07,730 relates to his rice business. The learned CIT (A) has correctly ordered the concerned AO within whose jurisdiction the husband of the assessee is assessed to verify the sanctity of the claim in the rice business. Having said so, just because the assessee is a joint holder of that account, any amount deposited by her husband which he would have earned from a separate business, it cannot be added to the hands of the assessee. Therefore, we do not find any reason to interfere with the order of the learned CIT (A) on the relief granted to the assessee by the CIT (A). The grounds are rejected. Disallowance of HRA - Held that - AO has noticed from the return of income of the assessee s husband has claimed deduction u/s 80GG. However, during the course of the appellate proceedings, the assessee submitted that her husband filed his revised return of income withdrawing the claim u/s 80GG. A copy of the revised return was also filed before the first appellate authority. The learned CIT (A) ordered to verify the genuineness of the assessee s claim and allow the claim of HRA after verifying the facts. With regard to this issue, our considered view is that whosoever paid the rent can claim the deduction and as directed by the first appellate authority, it is for the AO to verify the facts whether the assessee will get the claim or not. On this issue we do not see any reason to modify the direction of the CIT (A). The ground is accordingly rejected.

Summary

Issues:
1. Whether cash deposits in the bank account belong to the assessee or her husband.
2. Disallowance of House Rent Allowance (HRA).

Analysis:

Issue 1:
The main issue in this case was determining whether cash deposits in the bank account belonged to the assessee or her husband. The AO identified a significant cash deposit in the assessee's bank account and questioned the source of these funds. The assessee explained that the deposits were related to her husband's rice trading business, providing evidence to support this claim. The AO, however, added the entire deposits as income from unexplained sources in the hands of the assessee. The CIT (A) observed that the husband had declared that the cash deposits belonged to him and directed the AO to verify the sources in the husband's assessment. The Tribunal noted that the husband's declaration and the nature of transactions indicated that the deposits were related to his rice business. As the wife was a joint account holder, deposits made by the husband from his separate business could not be added to the wife's income. Therefore, the Tribunal upheld the CIT (A)'s decision and dismissed the Revenue's appeal.

Issue 2:
Regarding the disallowance of House Rent Allowance (HRA), the AO initially disallowed a specific amount claimed by the assessee's husband under section 80GG. However, during the appellate proceedings, the assessee submitted that her husband had revised his return to withdraw the claim under section 80GG. The CIT (A) directed the AO to verify the genuineness of the claim and allow the HRA deduction after verifying the facts. The Tribunal agreed with the CIT (A)'s decision, stating that the party who paid the rent could claim the deduction, and it was the AO's responsibility to verify the facts to determine the eligibility for the HRA claim. Therefore, the Tribunal rejected the assessee's cross objection on this issue.

In conclusion, both the Revenue's appeal and the assessee's Cross Objection were dismissed by the Tribunal, upholding the decisions of the CIT (A) on both issues.