2021 (3) TMI 715 - AT - Income Tax

Unexplained deposits made in Bank Account - Whether the amount represents receipt from transport business and taxable u/s 44AE - HELD THAT - It is seen that the assessee though filed the return of income, but did not disclose the savings bank account No. 7260 maintained with Seva Vikas Cooperative Bank. The transactions recorded in this bank account were consequently not depicted in the regular books of account maintained by him. When the AO enquired about the maintenance of such a bank account and sources of the deposits, the assessee came out with a plea that he was running a transportation business outside the books of account and the receipts from such business were deposited in the bank account. This plea was taken so as to circumvent the taxation of the full amounts deposited in the bank account in this respect and accordingly get covered u/s. 44AE of the Act with a lower incidence of income. This claim could have been merited acceptance if the assessee had shown the list of persons and their confirmations etc. for whom he did the transportation business and the resultant transportation receipts. No such evidence has been placed on record. In such a scenario, it is difficult to accept the assessee's plea of running a transportation business outside books of account and depositing the proceeds of such a business in this bank account. - Decided against assessee. Addition of deposits in this bank account on the ground that the assessee could not substantiate the source of deposits in the bank account - HELD THAT - We find that the assessee categorically stated before the AO that the deposit of ₹ 30.00 lakh in this bank account was his share in the sale of plot of land by his father. Father did sell certain property and the amount of proportionate capital gain was offered in the return of income. When such material was placed before the AO and the assessee contended that the bank account was maintained jointly with his brother, then it became the duty of the AO to examine the assessee's contention for unearthing the truth instead of simply making an addition towards the amounts credited in the bank account. Any temptation on the part of the AO to adopt short cuts and make addition without examining the assessee's contention, needs to be eschewed. We, therefore, set aside the impugned order and remit the matter to the file of the AO for examining the assessee's contention afresh in this regard and thereafter find out the amount of addition, if any, called for under the circumstances. Addition towards interest received - AO made addition for this sum on the basis of cash flow statement filed by the assessee, which indicated the interest earned but not disclosed in the return - CIT(A) affirmed the addition - HELD THAT - AR invited our attention towards bank account recording such interest income. Correct amount of the entry in the statement is ₹ 18,314/- as against ₹ 48,314/- which was inadvertently shown as interest income and got included in the assessee's total income. Since the correct amount as per the bank account is ₹ 18,314/-, we direct to restrict the addition to this extent. Consequential relief of ₹ 30,000/- is allowed.

Summary

Issues:
1. Addition of undisclosed deposits in Seva Vikas Cooperative Bank (Savings Account No. 007260).
2. Addition of undisclosed deposits in Seva Vikas Cooperative Bank (Savings Account No. 008638).
3. Addition of interest received but not disclosed in the return.

Issue 1:
The first issue pertains to the addition of undisclosed deposits in Savings Account No. 007260 of Seva Vikas Cooperative Bank. The assessee failed to disclose these deposits in the return of income, leading to a dispute with the tax authorities. The AO rejected the assessee's plea of running a transportation business outside the books of account to explain the deposits. The Tribunal dismissed the appeal, emphasizing the lack of evidence supporting the transportation business claim and citing previous rulings rejecting similar contentions for other assessment years.

Issue 2:
The second matter concerns the addition of undisclosed deposits in Savings Account No. 008638 of the same bank. The AO added the entire amount of deposits as the assessee could not substantiate the source of the funds. However, the assessee argued that the deposit was his share from the sale of a plot owned by his father-HUF. The Tribunal found merit in the assessee's contentions, noting the supporting documentation provided, such as the copy of the agreement for the plot sale and the father's tax return indicating the disclosure of the sale. The Tribunal set aside the addition, directing the AO to reexamine the matter based on the evidence presented.

Issue 3:
The final issue revolves around the addition of interest received but not disclosed in the return. The AO based the addition on the cash flow statement, which indicated higher interest income. The Tribunal, upon review, found that the correct amount of interest income was lower than initially assessed. Therefore, the Tribunal directed to restrict the addition to the accurate amount reflected in the bank account, providing consequential relief to the assessee.

In conclusion, the Tribunal partially allowed the appeal, setting aside the additions related to undisclosed deposits in Savings Account No. 008638 and adjusting the interest income addition to the correct amount. The Tribunal's decision underscores the importance of substantiating claims with proper documentation and the AO's duty to thoroughly examine the assessee's contentions before making additions to the total income.