2021 (3) TMI 1064 - AT - Income Tax

Unexplained cash deposits in syndicate bank account - HELD THAT - Assessee has explained the total cash deposit in his Syndicate Bank account - CIT(A) has held that sale of car was not for ₹ 5 lakhs but ₹ 5.50 lakhs and therefore he has granted a relief of ₹ 50,000/- only and sustained the addition of ₹ 7,70,000/-. In view of the fact that to deposit in the bank account of the assessee, assessee has received ₹ 550,000 on sale of car and further ₹ 517,397/- available with the assessee is an opening cash on hand, further the assessee has also cash flow generated during the year of approximately ₹ 320,000 out of his professional income justifies the deposit of cash into the bank account of the assessee of ₹ 1,320,000. In view of above uncontroverted facts, we do not find any justification for addition of all the above sum of ₹ 7,70,000/- in the hands of the assessee. In view this ground No. 2 of the appeal of the assessee is allowed. Representative assessee u/s 160 or u/s 161 - Addition on account of long-term capital gain chargeable to tax on account of sale of property by non-resident - Addition holding assessee as an agent of the non-resident as he is holding a power of attorney and the property is sold by the assessee and the money is transferred to the non-resident owner - HELD THAT - Provisions of Section 161 provides that every representative assessee as regards the income in respect of which he is a representative assessee shall be subject to the same duties, responsibilities and liabilities as if income is received by or accruing to or in favour of him beneficially and shall be liable to assessment in his own name in respect of that income but such assessment shall be deemed to be made upon him in his representative capacity only. The tax subject to other provisions of the income tax act be levied upon and recovered from him in like manner and to the same extent as would be leviable upon and recoverable from the person represented by him. Therefore, the assessing officer should have passed a separate assessment order from the income of the assessee with respect to the income of the non-resident holding the assessee as a representative of a non-resident. In the present case, the assessing officer has passed an order in the name of the assessee without specifying that the above income is chargeable to tax in the hands of the assessee as a representative assessee of a non-resident i.e. not passing a separate order but adding the income of the non-resident in the hands of the assessee is not in accordance with the provisions of Section 161 - AO has also charged the tax in the hands of the assessee in the residential status of resident and not non-resident. On this score, the addition made by the learned assessing officer of the income of the non-resident Under the head capital gain is required to be deleted. Thus, ground number of the assessee is allowed.

Summary

Issues Involved:
1. Addition of ?7,70,000 on account of cash deposited in Syndicate Bank.
2. Taxability of income from the sale of property by a non-resident and its computation.

Issue-wise Detailed Analysis:

1. Addition of ?7,70,000 on account of cash deposited in Syndicate Bank:

The assessee contested the addition of ?7,70,000 confirmed by CIT(A) out of the total addition of ?8,20,000 made by the Assessing Officer (AO) on account of cash credits in Syndicate Bank. The assessee provided a cash flow statement and evidence of the sale of a car for ?5,00,000, which the AO accepted. However, the AO did not accept the opening cash balance of ?5,17,397 without providing any reasons. The CIT(A) also did not believe the opening balance, stating that the assessee could not have such savings given his income. The Tribunal found no reason to ignore the opening balance and the cash generated during the year. The Tribunal concluded that the assessee had adequately explained the total cash deposit of ?13,20,000 in his bank account, thus allowing the appeal on this ground.

2. Taxability of income from the sale of property by a non-resident and its computation:

a. Treating the Assessee as an Agent of Non-Resident:

The assessee argued that he could not be treated as an agent of the non-resident without a specific order under Section 163 of the Income Tax Act and without giving him an opportunity to be heard. The AO treated the assessee as a representative of the non-resident, Mr. Ashok Tyagi, under Section 160, and added the long-term capital gain to the assessee's income. The Tribunal noted that the AO should have passed a separate assessment order for the income of the non-resident in the hands of the assessee as a representative assessee. The Tribunal found that the AO did not follow the proper procedure and thus deleted the addition of ?56,55,874 on this ground.

b. Agricultural Land as Capital Asset:

The assessee contended that the land sold was agricultural and situated beyond 8 km from the municipal limits of Delhi, thus not a capital asset under Section 2(14). The AO treated the land as a capital asset based on the website of the Delhi Government. The Tribunal did not adjudicate this issue as it became academic after allowing the appeal on procedural grounds.

c. Disallowance of Cost of Improvement:

The assessee claimed costs of improvement for the land sold, which the AO disallowed due to a lack of evidence. The Tribunal did not adjudicate this issue as it became academic after allowing the appeal on procedural grounds.

d. Deduction under Section 54F:

The assessee claimed a deduction under Section 54F for investments in residential properties. The AO disallowed the claim for one property, stating there was no allotment letter in the name of Mr. Ashok Tyagi. The Tribunal did not adjudicate this issue as it became academic after allowing the appeal on procedural grounds.

Conclusion:

The Tribunal allowed the appeal partly, deleting the addition of ?7,70,000 on account of cash deposits and the addition of ?56,55,874 on account of the sale of property by a non-resident due to procedural lapses by the AO. The other grounds became academic and were not adjudicated.