2023 (4) TMI 563 - AT - Income Tax

Undisclosed income - Unexplained cash deposit in Saving Bank Account - HELD THAT - Assessee has submitted cash flow statement from 08.04.2013 to 12.02.2013 explaining the source of cash deposit to the Oriental Bank of Commerce account and the AO has not made any comment thereon. Accounts of the assessee proprietorship firm M/s Lala Flour Mills are audited u/s 44AB of the Act and the assessee has filed audit report in Form No.3CB and 3CD along with audited balance sheet before the AO for verification which has never been disputed by the AO - no addition is called for in the hands of the assessee on account of cash deposits to his bank account since the assessee has successfully demonstrated that the amount so deposited to his bank account is out of withdrawals from the bank account of his proprietorship firm and profit received in cash from the proprietorship firm. Decided in favour of assessee. Addition of gift received by assessee from his mother - Used for Tour Travelling expenses - HELD THAT - Assessee has submitted affidavit of his mother stating the clear facts that she is holding PAN, but had not filed the return of income during the period under consideration. Counsel submitted that since her income was lesser than the taxable limit, therefore, she was not filing the return of income for relevant AY 2014- 15. In para 3 of the affidavit, As per the affidavit, Mother is having PAN, but, had not filed the return of income as the income was less than the taxable limit. However, being an old lady, if she has gifted some amount to her son for Europe tour, then, the same cannot be disputed or disregarded on the basis of surmises and conjectures. Therefore, ground No.2 of the assessee is allowed. TDS u/s 194J or 194I - rent received as undisclosed income - deduction of TDS is defective and deduction of TDS was under the wrong provisions by the tenant - HELD THAT - From the copy of computation of income, it is clearly discernible that the assessee has shown rental income in the computation of income and has also claimed deduction u/s 24 of the Act thereon - the landlord, who is declaring rental income in his return of income, cannot be blamed for deduction of TDS under wrong provision by the submission of incorrect return of TDS by the tenant. Therefore, the disallowance made by the AO and sustained by the ld.CIT(A) is held as invalid, baseless and thus, unsustainable. Therefore, the ground of the assessee allowed.

Summary

Issues Involved:
1. Addition of cash deposit in Saving Bank Account as undisclosed income.
2. Treatment of gift received from mother as undisclosed income.
3. Addition of rent received as undisclosed income due to tenant's TDS error.

Analysis:

Issue 1: Addition of cash deposit in Saving Bank Account
The assessee contested the addition of Rs. 12,98,000 as undisclosed income, arguing that the cash deposit was from loans repayment, cash sales, and rental income. The assessee provided detailed explanations and supporting documents, including audited reports of the firm. The Senior DR insisted on the necessity of day-to-day cash book for verification. The Tribunal noted the factual position, acknowledged the cash flow statement, and accepted the audited accounts of the firm. Consequently, the Tribunal ruled in favor of the assessee, directing the deletion of the addition.

Issue 2: Treatment of gift received from mother
The assessee received a gift of Rs. 3 lakh from his mother for travel expenses, supported by an affidavit. The AO questioned the lack of ITR and bank statements as evidence. The Tribunal considered the affidavit, emphasizing the mother's PAN and income status. Given the circumstances and the clear purpose of the gift, the Tribunal allowed the appeal, directing the deletion of the addition.

Issue 3: Addition of rent received due to tenant's TDS error
The tenant deducted TDS under the wrong provision, leading to the disallowance of rent received by the assessee. The assessee provided a confirmation-cum-certificate from the tenant explaining the error. The Tribunal observed the rental income declaration and the tenant's TDS mistake. Concluding that the disallowance was baseless, the Tribunal allowed the appeal, directing the deletion of the addition.

In conclusion, the Tribunal allowed the appeal filed by the assessee, ruling in favor of the assessee on all three issues. The additions made by the AO were deemed unjustified and unsustainable, leading to their deletion.