2022 (3) TMI 435 - AT - Income Tax

Addition on account of bank deposits during the course of assessment proceedings - HELD THAT - It is observed that there is no dispute that the assessee has declared his income u/s 44AF of the Act, which has been accepted by the revenue authorities and turnovers have also been accepted as per section 44AF of the Act. Considering the submissions of the ld. AR of the assessee that the deposits are from out of the retail sales and from out of the opening capital and cash balances brought forward from the earlier years and inter bank deposits, we restrict the addition to 10% i.e. ₹ 1,01,251/- as against the addition of ₹ 10,12,510/- made by the AO on account bank deposits. Thus, this ground of the assessee is partly allowed. Addition representing gifts received from assessee s brothers - CIT(A) observed that in the confirmation letter no amount was mentioned and registered gift deed was not produced for perusal. He, therefore, held that the AO had correctly treated the above amounts as unexplained cash credits - HELD THAT - There is no movement of any cash/kind from the transaction recorded nd the gift which has been executed on 31st May, 2007, but, the assessee has recorded the figure before executing the gift deed, will not attract any cash/kind transactions, as the assessee only inflated the figures. The assessee has made a wrong entry in the books of account, which will not warrant any addition as held by the Hon ble Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd 1971 (8) TMI 10 - SUPREME COURT . No doubt the assessee has wrongly mentioned the amount and the gift has been materialized in the following Financial Year. In view of our above observations, we delete the addition made on this count. Accordingly, this ground is allowed. Non grant relief of LIC premium paid - HELD THAT - Before us, assessee has produced LIC premium paid receipts, which are placed on record. We, therefore, direct the AO to allow the assessee s claim towards LIC premium paid, u/s 80C of the Act. Thus, this ground is allowed.

Summary

Issues:
1. Assessment order passed by the Income Tax Officer under Section 143(3) for the assessment year 2007-08.
2. Validity of adding cash deposits made in the bank as income of the assessee.
3. Addition of gift received from brothers as income.
4. Disallowance of deduction claimed for LIC premium paid.

Analysis:

Issue 1: Assessment Order under Section 143(3)
The appeal was against the CIT(A)'s order confirming the assessment order passed by the Income Tax Officer for the assessment year 2007-08 under the Income Tax Act, 1961. The appellant argued that the assessment order was contrary to law as it was beyond the prescribed time limit. The Income Tax Officer had issued a notice after the expiration of the one-year period, which the appellant contended was barred by limitation. The appellant also challenged the extension period applied by the Income Tax Officer, claiming it had no legal sanctity. However, the tribunal found that the assessment was completed within the statutory time limit and dismissed this ground.

Issue 2: Cash Deposits in Bank
The Assessing Officer added cash deposits made in the bank as income of the assessee. The appellant contended that the deposits were from retail sales, past savings, and opening capital balances. The tribunal observed that the assessee's income under Section 44AF had been accepted, and turnovers were in line with the Act. Considering the submissions, the tribunal restricted the addition to 10% of the deposited amount, allowing the ground partly.

Issue 3: Addition of Gift Received
The Assessing Officer added the gift received from the appellant's brothers as income, questioning the genuineness of the gift. The tribunal noted discrepancies in the financial statements but found that the appellant had wrongly recorded the gift amount before executing the gift deed. Citing legal precedent, the tribunal ruled in favor of the appellant, deleting the addition made by the Assessing Officer.

Issue 4: Disallowance of LIC Premium Deduction
The Assessing Officer disallowed the deduction claimed for LIC premium paid due to lack of proof. The tribunal, upon the appellant producing the receipts, directed the AO to allow the claim for LIC premium paid under Section 80C. Consequently, this ground was allowed.

In conclusion, the tribunal partly allowed the appeal, addressing each issue raised by the appellant and providing detailed reasoning for its decisions.