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2018 (11) TMI 513 - AT - Income TaxAddition of unexplained cash deposits in the bank account - assessee was holding two separate accounts - whether the additions made by Ld.CIT(A) are of the transactions independent in nature or whether they are the same transactions on which Assessing Officer made the addition? - Held that - The assessee has two bank accounts, one in the name of company and another in her personal name. AO noticed the cash deposits in the account maintained on behalf of the company and failed to notice the cash deposits in the personal account. But according to AR, this was disclosed before the Assessing Officer and Assessing Officer has accepted it after verification. We observe, Assessing Officer has not discussed anything in his order about the existence of second account in ICICI bank. Assessing Officer has verified only two bank accounts viz., Karur Vysya Bank and ICICI Bank. There was no discussion about second account with ICICI Bank. In our view, the second account was not brought to the notice of the Assessing Officer. However, this is irrelevant at this point of time. Whether this transaction is independent or same transaction of deposits in bank account. In our view, it is one transaction. The deposits in the bank account which belongs to the company account irrelevant to the assessee but the deposits in the personal account of assessee is relevant for this assessment and the Assessing Officer intended to make addition in her personal bank account and the same was made by the Ld.CIT(A). Therefore, this addition is nothing but coming out of same addition and not independent. - Decided against assessee.
Issues Involved:
1. Legitimacy of cash deposits in the assessee's bank accounts. 2. Authority of the Commissioner of Income Tax (Appeals) [CIT(A)] to enhance an assessment based on new findings. 3. Whether the CIT(A) can add or enhance income from independent transactions not originally considered by the Assessing Officer (AO). Detailed Analysis: 1. Legitimacy of Cash Deposits in the Assessee's Bank Accounts: The assessee filed her return of income for the AY 2009-10, declaring a total income of ?7,61,990/-. During scrutiny, the AO noticed cash deposits of ?2,50,000/- in the assessee's bank account, which were claimed to have been received from Mr. Rama Krishna. The AO added this amount to the income as the assessee failed to prove the identity, genuineness, and creditworthiness of the lender. Upon appeal, the CIT(A) found that the cash deposits were made in a bank account held in the name of the company, M/s. Destiny Overseas Pvt. Ltd., Chandigarh, and deleted the addition. However, the CIT(A) noticed additional cash deposits in the personal account of the assessee amounting to ?1,10,090/- and confirmed this addition after giving the assessee an opportunity to be heard. 2. Authority of CIT(A) to Enhance an Assessment Based on New Findings: The assessee argued that the CIT(A) erred in making an addition of ?1,10,090/- as it was not part of the original assessment and was beyond the powers of the CIT(A) as provided under Section 251 of the Income Tax Act. The assessee cited several case laws, including CIT Vs. Shri B.P. Sherafuddin, Hotel Gazala Inn, CIT Vs. Union Tyres, and CIT Vs. Sardarilal & Co., to support the argument that the CIT(A) cannot introduce a new source of income that was not considered by the AO in the original assessment. 3. Whether the CIT(A) Can Add or Enhance Income from Independent Transactions: The CIT(A) added the amount of ?1,10,090/- based on new findings of cash deposits in the personal account of the assessee, separate from the deposits in the company's account. The assessee contended that these were independent transactions and the CIT(A) should not have made the addition. The case laws cited by the assessee supported the view that the appellate authority cannot introduce a new source of income not considered by the AO. Judgment: After considering rival submissions and material on record, it was noted that the assessee held two separate accounts—one in the name of the company and another personal savings account. The AO initially noticed cash deposits in the company's account but failed to notice deposits in the personal account. The CIT(A) found additional cash deposits in the personal account and made the addition. The tribunal examined whether the additions made by the CIT(A) were independent transactions or related to the same source of income considered by the AO. The tribunal agreed with the legal precedents that the CIT(A) has wide powers but cannot make additions based on independent sources of income not considered by the AO. However, it was concluded that the deposits in the personal account were part of the same transaction initially examined by the AO. Therefore, the addition by the CIT(A) was not considered an enhancement based on a new source of income but rather a continuation of the same transaction. Conclusion: The appeal of the assessee was dismissed, and the addition of ?1,10,090/- made by the CIT(A) was upheld. The tribunal ruled that the CIT(A)'s addition was not an independent transaction but related to the same source of income initially examined by the AO. Order Pronounced: The order was pronounced in the open court on 9th November 2018.
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