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2021 (4) TMI 676 - AT - Income TaxAddition u/s 69 on account of business income from M/s Ashu Marketing proprietorship concern engaged in the business of trading of clothes - AO made an addition on account of income estimated by applying net profit @ 8% on gross sales - assessee has explained the reasons for not disclosing this income as there was a loss in the said business activity and hence it was not claimed by the assessee in the return of income due to smallness of the amount - HELD THAT - AO has not disputed the transactions as recorded in the bank account of the assessee with HDFC Bank in the name of proprietorship concern as well as the gross sales shown by the assessee in the profit and loss account produced before the AO - AO has rejected the said computation of the loss as per the profit and loss account and estimated the income of the assessee in respect of retail business of cloth. Once the retail business of purchase and sale of cloth is accepted by the Assessing Officer and gross sales as shown by the assessee is not in dispute then the loss not reflected in the return of income would not lead to the re-classification of the income. Since the assessee has not declared this business income/loss in the return of income therefore, the Assessing Officer has rightly invoked the provisions of section 44AF and estimated the income of the assessee - However, the re-classification of the income by applying the provisions of section 69 of the Act is contrary to the facts as well as law and action of the Assessing Officer is highly unjustified and unreasonable. Accordingly, the said addition is directed to be treated as business income of the assessee. This ground of the assessee is partly allowed. Unexplained investment in the immovable property - immovable property which was purchased by the assessee vide sale deed dated 27.04.2012 - The assessee has explained the source as cash withdrawal of ₹ 6,00,000/- from the Axis Bank account of the assessee on 23.04.2012 and availability of fund in the bank account is also explained by the assessee as withdrawal from the partnership firm M/s Soft Solutions of ₹ 9,00,000/- which is also reflected in the Axis Bank account of the assessee - HELD THAT - As the entries in the bank account of the assesse are not in dispute and therefore when the withdrawal from the bank account of ₹ 6,00,000/- and payment of purchase consideration of ₹ 5,30,120/- are contemporaneous transactions then the assessee has explained the source. It is not the case of the Revenue that the said amount of ₹ 6,00,000/- withdrawn by the assessee on 23.04.2012 was utilized for some other purpose then the purchase of property on 27.04.2012. The withdrawal of the cash from the bank account and payment of consideration are matching transactions without any delay or time gap. Hence, in view of the facts as evident from the record and particularly from the bank account of the assessee. The assessee has discharged its onus of explaining source of investment. Accordingly, the addition made by the Assessing Officer is deleted. Unexplained deposits in the saving bank account of the assessee and his daughter with HDFC Bank and Axis Bank u/s 68 - HELD THAT - The assessee has now explained the source of these deposits as transfer the fund from other bank account of the assessee as well as the opening balance available with the assessee as per the cash flow statement. It is pertinent to note that all these explanations and details as well as evidences were not produce before the Assessing Officer. Therefore, the cash flow statement relied upon by the assessee as well as the explanation that the deposits in the bank account of the assessee are from other banks are to be verified. Hence, in the facts and circumstance of the case and interest of justice this issue is set aside to the record of the Assessing Officer for proper verification and examination of all the relevant facts as well as the evidence relied upon by the assessee in the shape of the transfer from the other bank accounts and availability of opening cash balance as per the cash flow statement. Needless to say the assessee be given an opportunity before passing the fresh order. Disallowance of deduction u/s 80TTA - AO made an addition on account of interest income under the head income from other sources - HELD THAT - Before the CIT(A) the assessee has claimed the deduction u/s 80TTA as the interest income was in respect of saving bank account is less than the threshold limit. The CIT(A) has directed the Assessing Officer to allow the necessary deduction as per law from income of ₹ 3,097/- being in the income from other sources. Once the CIT(A) has directed the Assessing Officer to allow the deduction as per law no grievance is left against the impugned order of the CIT(A). Accordingly, the Assessing Officer is directed to consider the claim of deduction u/s 80TTA and allow the same if the assessee satisfy the requirements of eligibility of deduction. Appeal of the assessee is partly allowed.
Issues Involved:
1. Opportunity of being heard and natural justice. 2. Addition of ?49,670 under Section 69. 3. Addition of ?5,30,120 under Section 69. 4. Addition of ?1,41,800 under Section 69. 5. Disallowance of deduction under Section 80TTA. Detailed Analysis: 1. Opportunity of Being Heard and Natural Justice: The assessee contended that the appellate authority did not provide a proper opportunity of being heard and that the order was against natural justice and arbitrary. These grounds were considered general and did not require specific adjudication. However, they were taken into account while deciding the merits of other issues. 2. Addition of ?49,670 under Section 69: The Assessing Officer (AO) added ?49,670 as business income from the assessee's proprietorship concern, M/s Ashu Marketing, by estimating net profit at 8% on gross sales. The AO rejected the assessee's profit and loss account, which declared a loss of ?495.07, and instead estimated income under Section 44AF. The AO's action of reclassifying this as income under Section 69 was challenged. The Tribunal found that the AO's reclassification was unjustified since the business activity and transactions were accepted. Therefore, the addition was directed to be treated as business income, partially allowing the assessee's ground. 3. Addition of ?5,30,120 under Section 69: The AO added ?5,30,120 as unexplained investment in immovable property. The assessee explained the source as a withdrawal of ?6,00,000 from an Axis Bank account, funded by a ?9,00,000 withdrawal from a partnership firm, M/s Soft Solutions. The Tribunal found that the assessee adequately explained the source of investment with contemporaneous transactions in the bank account. Consequently, the addition was deleted. 4. Addition of ?1,41,800 under Section 69: The AO added ?1,41,800 as unexplained deposits in the assessee's and his daughter's savings accounts. The assessee explained these deposits as transfers from other bank accounts and opening cash balance. The Tribunal noted that these explanations and evidence were not presented before the AO. Therefore, the issue was remanded to the AO for verification, with instructions to provide the assessee an opportunity to present evidence. 5. Disallowance of Deduction under Section 80TTA: The AO added ?3,097 as interest income under "income from other sources." The assessee claimed a deduction under Section 80TTA, which the CIT(A) directed the AO to allow if the conditions were met. The Tribunal found no grievance against the CIT(A)'s order, directing the AO to consider and allow the deduction if eligible. Conclusion: The appeal was partly allowed, with specific directions for reclassification and verification of certain additions and deductions. The Tribunal emphasized the need for proper verification and adherence to natural justice principles.
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