2019 (12) TMI 1250 - AT - Income Tax

Addition u/s 68 - Assessment of HUF - AO felt that the money of assessee is routed through assessee s-HUF and the amount is concealed income - HELD THAT - HUF has filed its return of income for the AY.2012-13 and the CPC, Bengaluru has processed the return also on 14-05-2013. It is not known under which provisions or proceedings, the AO has issued notice dt.13-10- 2014, requiring the assessee to explain the sources for the deposits in cash to the assessee in HUF status. Assessee has also filed reply and the acknowledgment of the ITO, Ward-I, Proddatur is also available on the said copy. After that date, no action has been taken by the ITO, Proddatur and therefore it is to be deemed that the AO/ITO was satisfied with the explanation given by the assessee-HUF. Once the AO of the assessee-HUF has accepted the source for the deposits made into its accounts, the creditworthiness of the HUF has been accepted by the ITO and therefore, the same cannot be doubted in the hands of the individual. In view of the same, inclined to delete the addition - Decided in favour of assessee.

Summary

Issues:
1. Addition of unsecured loans to tax based on scrutiny assessment.
2. Dispute regarding the genuineness of transactions between the assessee and HUF.
3. Appeal against the addition of &8377; 9,85,000/- confirmed by CIT(A).

Analysis:

Issue 1:
The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2012-13. The assessment was initiated due to a large increase in unsecured loans in the return filed by the individual assessee. The Assessing Officer completed the assessment under section 144 of the Income Tax Act as the assessee did not appear, bringing the unsecured loans of &8377; 12 Lakhs to tax. The CIT(A) partially upheld the addition, confirming &8377; 9,85,000/- only, stating that the assessee failed to prove the genuineness of the transactions with his HUF.

Issue 2:
The main contention in the appeal was regarding the genuineness of the transactions between the assessee and his HUF. The assessee argued that he borrowed &8377; 12 Lakhs from his HUF, which was transferred through banking channels. The counsel provided copies of notices and explanations submitted to the AO regarding the deposits made by the HUF. It was argued that since no further action was taken by the AO, the explanation provided by the HUF should be deemed accepted, thus proving the creditworthiness of the HUF. The Tribunal found that the AO was satisfied with the explanation given by the HUF, and hence, the addition of &8377; 9,85,000/- confirmed by the CIT(A) was deleted.

Issue 3:
The assessee appealed against the addition of &8377; 9,85,000/- confirmed by the CIT(A). The Tribunal, after considering the arguments and material on record, concluded that since the AO was satisfied with the explanation provided by the HUF regarding the deposits, the creditworthiness of the HUF should be accepted. Therefore, the Tribunal allowed the appeal of the assessee, deleting the addition of &8377; 9,85,000/-.

In conclusion, the Tribunal allowed the appeal of the assessee, deleting the addition of &8377; 9,85,000/- confirmed by the CIT(A) based on the genuineness of the transactions between the assessee and his HUF, as accepted by the Assessing Officer.