2022 (1) TMI 36 - AT - Income Tax

Addition u/s 68 - Cash withdrawals made by employees by Bearer Cheque has not been considered for working of peak credit - Assessee had submitted that the cash withdrawn by employees should also be considered as these persons have withdrawn the cash on behalf of the family members and handed over to the concerned member - submission of Ld.AR that the property belongs to the HUF and that assessee proceeded to complete the sale proceeds being a member of HUF - HELD THAT - Taxability of capital gain on sale of such property has been considered on protective basis in the assessment carried out in case of HUF - deduction has also been claimed u/s. 54 by the HUF. In sofaras the interest income added in the hands of the assessee is concerned, it has been stated that the bank account no. 5023 at Karnataka State Co-operative Apex Bank was mistakenly declared by assessee in the return filed on 27.10.2014. Tax is to be computed in the hands of the right person and in the present facts of the case, the capital gains and interest is to be computed in the hands of the HUF and not hands of the individual as held by the authorities below. As decided in case of ITO vs. Ch. Atchaiah 1995 (12) TMI 1 - SUPREME COURT under the present Act, the Income Tax Officer has no option like the one he had under the 1922 Act. He can, and he must, tax the right person and the right person alone. By right person , we mean the person who is liable to be taxed, according to law, with respect to a particular income. The expression wrong person is obviously used as the opposite of the expression right person . Merely because a wrong person is taxed with respect to a particular income, the Assessing Officer is not precluded from taxing the right person with respect to that income. This is so irrespective of the fact which course is more beneficial to the Revenue. Accordingly, we remand these issues to the Ld.CIT(A) to be dealt with in accordance with law, without being prejudiced with the view already taken by the authorities below. Accordingly, all the grounds raised by all the assessee in the appeals filed before us stands allowed for statistical purposes.

Summary

Issues Involved:
1. Consideration of cash withdrawals made by employees via bearer cheques for working of peak credit.
2. Admission of additional evidence filed by the assessee.
3. Taxability of interest income and capital gains in the hands of the right person (individual vs. HUF).

Detailed Analysis:

1. Consideration of Cash Withdrawals by Employees:
The primary issue in all appeals was whether cash withdrawals made by employees via bearer cheques should be considered for working of peak credit. The assessee argued that these withdrawals were on behalf of family members and should be included in the peak credit calculation. The Assessing Officer (AO) rejected this claim, stating there was no evidence to show that the cash withdrawn by these individuals was handed over to the assessee. The AO noted that the assessee failed to produce the employees for verification or provide their details. Consequently, the AO assessed the unexplained peak credit at ?88,50,000 under section 68 of the Income Tax Act, relying on the Supreme Court decision in Sushil Kumar Sharma (HUF) vs. CIT.

2. Admission of Additional Evidence:
The assessee presented additional evidence in the form of confirmations and identity proofs from the employees who withdrew the cash. The Tribunal considered whether this additional evidence should be admitted. It was noted that the assessee was not granted sufficient time to produce these evidences before the AO or the Commissioner of Income Tax (Appeals) [CIT(A)]. The Tribunal found that the confirmations filed by the employees were relevant and deserved verification. The Tribunal admitted the additional evidence and remanded the case to the CIT(A) for verification and consideration in accordance with the law, ensuring proper opportunity for the assessee to be heard.

3. Taxability of Interest Income and Capital Gains:
For the assessment year 2008-09, an additional issue was raised regarding the taxability of interest income and capital gains. The assessee claimed that the interest income from a bank account and the capital gains from the sale of property belonged to the HUF of his father, Shri Krishna Reddy, and not to him personally. The AO added the interest income to the assessee’s income, as it was not offered to tax in the revised return. The Tribunal agreed with the assessee's contention that the income should be taxed in the hands of the right person, as per the Supreme Court ruling in ITO vs. Ch. Atchaiah. The Tribunal remanded the issue to the CIT(A) for reconsideration, ensuring that the income is taxed in the hands of the appropriate entity (HUF).

Conclusion:
The Tribunal allowed the appeals for statistical purposes, admitting the additional evidence and remanding the cases to the CIT(A) for further verification and consideration. The Tribunal emphasized the need for proper opportunity for the assessee to present their case and for the income to be taxed in the hands of the right person. The order was pronounced in open court on 23rd December 2021.