2019 (9) TMI 679 - AT - Income Tax

Addition made towards undisclosed investment - taxability of the cash deposits in the assessee s bank account - HELD THAT - Merely because the assessee s father did not file the return of income within the due date specified u/s 139(1) it cannot be held that the cash component of the consideration should be assessed in the hands of the assessee as has been held by the CIT(A). Taking into account the factual matrix and the circumstances of the case, as discussed above, the inference of the AO that the cash deposits amounting in the assessee s bank account in Corporation Bank, Vijaynagar Branch, Mysore, constitutes unexplained investment by the assessee in the case on hand is not tenable. The explanation furnished by the assessee in this regard was proper and plausible and ought to have been accepted, but was rejected without substantial reasons. The finding rendered by the ITAT-Jaipur Bench in the case of Smt. Ramawati 2015 (4) TMI 1277 - ITAT JAIPUR is equally applicable to the facts of the present case and therefore the addition made by the AO being untenable and unsustainable is ordered to be deleted. - Decided in favour of assessee.

Summary

Issues Involved:
Appeal against order of CIT(A) for Assessment Year 2010-11 challenging addition of cash deposits as unexplained investment.

Analysis:

Issue 1: Opportunity to Appellant
The appellant contended that the AO failed to provide sufficient opportunity before passing the assessment order under section 143(3) of the Act. However, the Tribunal did not find any merit in this argument.

Issue 2: Erroneous Assessment Order
The appellant challenged the assessment order as erroneous in law and under the facts of the case. The Tribunal reviewed the contentions but upheld the assessment order.

Issue 3: Demand Raised
The appellant disputed the demand raised by the AO. The Tribunal examined the facts and concluded that the demand was justified based on the assessment.

Issue 4: Addition of Cash Deposit
The main issue revolved around the addition of cash deposits of &8377; 16,80,500 as unexplained investment. The appellant argued that the cash was part of the consideration received for the sale of her father's property. The Tribunal analyzed the evidence presented, including the sale deed and the father's income tax return, and concluded that the addition made by the AO was not sustainable. The Tribunal emphasized that the capital gains from the property sale should be assessed in the father's hands, not the appellant's.

Issue 5: Characterization of Addition
The appellant contended that the addition was incorrectly characterized as unexplained investment and should fall under "Capital Gain" instead of "Income from other sources." The Tribunal agreed with this argument and ordered the deletion of the addition.

Issue 6: Capacity as Power of Attorney Holder
The appellant highlighted that she acted as a power of attorney holder on behalf of her father, who was in judicial custody. The Tribunal acknowledged this fact and emphasized that the appellant's individual capacity was not relevant to the assessment.

Issue 7: Jurisdiction of AO
The appellant argued that the AO lacked jurisdiction to subject her to assessment under the Act as she was acting as a power of attorney holder. The Tribunal agreed with this argument and ruled in favor of the appellant.

Issue 8: Penalty Proceedings
The appellant challenged the initiation of penalty proceedings under section 271(1)(c) of the Act. The Tribunal did not delve into this issue as the main addition was deleted.

Overall, the Tribunal allowed the appeal for Assessment Year 2010-11, emphasizing that the cash deposits were part of the consideration for the property sale by the appellant's father, and therefore should not be treated as unexplained investment in the appellant's hands. The Tribunal's decision was based on the evidence presented and relevant legal principles, ultimately ruling in favor of the appellant.