2019 (2) TMI 511 - AT - Income Tax

Addition on account of cash deposited in bank - Held that - AO instead of taking up the assessment of the preceding year has made the addition of the said amount by rejecting the source of the amount as shown as opening cash balance. Further, the AO has not rejected the books of accounts of the assessee and, therefore, once the assessee has established the availability of the cash in the books of account, then the proper course of action for rejecting the said claim and making the addition is to reopen the assessment of the earlier year. Hence, to the extent of availability of cash of ₹ 11,32,626/- being opening cash balance which was duly reflected in the books of account of the assessee for the year under consideration as well as in the earlier year, the same cannot be rejected and the consequential addition is not sustainable. Claim of gifts received from the mother and father both the donors are assessed to tax and filing their returns of income, then the assessee has discharged her onus of proving the identity, creditworthiness and genuineness of the transaction. In case the AO was not satisfied with the evidence produced by the assessee, the AO was very well empowered to summon the donors for their examination. Though there may be an issue of creditworthiness of the donors for giving the gifts for the earlier year as well as for the year under consideration, however, the issue of gifts given in the earlier year cannot be examined for the year under consideration as it was part of the cash introduced by the assessee in the earlier year. Further, there is no dispute that the reason and occasion of the deposit made in the bank account is to purchase a house which was purchased by the assessee. Therefore, in the facts and circumstances of the case, the addition made by the AO is deleted. - Decided in favour of assessee. Unexplained expenditure for registration of plot of land - Held that - This issue is consequential as the assessee has explained the source of this expenditure by opening cash balance as well as the gift of ₹ 2,50,000/-. Since we have decided the issue of availability of opening cash balance as well as genuineness of the gift in favour of the assessee, the said addition made by the AO is liable to be deleted. - Decided in favour of assessee.

Summary

Issues involved:
1. Addition of cash deposited in bank account.
2. Disallowance of plot registration expenses.

Detailed Analysis:

1. Addition of cash deposited in bank account:
The appellant, an individual earning income from business and other sources, challenged the addition of ?13,82,626 made by the Assessing Officer (AO) on account of unexplained cash deposits in the bank accounts. The AO noted cash deposits in two bank accounts and questioned the source. The appellant explained the deposits as opening cash balance and gifts received. The AO, despite allowing a cash withdrawal benefit, added the amount as unexplained. The appellant contended that the deposits were from the opening balance and gifts, used to purchase a house. The Commissioner (Appeals) confirmed the addition. The appellant argued that the AO should have rejected the books of accounts if disputing the source. The appellant provided evidence of opening cash balance and gifts, but the AO and Commissioner (Appeals) found them unverifiable. The Tribunal noted the appellant's regular tax filings and balance sheets showing the cash balance. It ruled that if the AO disputed the cash, it should have been addressed in the previous year's assessment. The Tribunal found the addition unsustainable and deleted it.

1.1. Gifts explanation:
The Tribunal discussed the gifts received from the appellant's parents and their income tax assessments. It noted the AO's rejection due to lack of parents' examination, although gift deeds were filed. The Commissioner (Appeals) upheld the rejection, but the Tribunal found the documents were submitted. It emphasized that the parents' tax assessments supported the gifts' credibility, considering their income. The Tribunal stated that the AO could have summoned the parents for verification. It ruled in favor of the appellant, deleting the addition.

2. Disallowance of plot registration expenses:
The AO disallowed ?2,14,050 for plot registration expenses, linked to the cash deposits issue. The Tribunal, having resolved the cash deposit matter, deleted this addition as well.

In conclusion, the Tribunal allowed the appellant's appeal, overturning both additions.