SARLA VASANT THAKKAR,GHATKOPER, MUMBAI EAST vs. WARD 27(3)(2), MUMBAI, MUMBAI

The brief facts of the case are that the assessee, an individual, filed her return of income for A.Y. 2012-13 on 31.08.2012 declaring total income of ₹1,44,310/-. Subsequently, the Assessing Officer received information from the Investigation Wing that M/s Jay Traders, a proprietary concern of Shri Manohar Ganu Gorivale, had transferred two amounts of ₹7,00,000/- each on 23.09.2011 and 24.02.2012 to ICICI Bank Account No. 2601018557. On the basis of this information, the Assessing Officer reopened the assessment under section 147 of the Act. The assessee filed her return in response to the notice declaring the same income of ₹1,44,310/-.

During the reassessment proceedings, the assessee objected to the reopening and submitted that the bank account in question belonged to her husband, Shri Vasant T. Thakkar. The Assessing Officer issued notice under section 133(6) of the Act to ICICI Bank and obtained the details of the account. On verification, the Assessing Officer found that the assessee was the first holder of the account and her husband was the second holder. He therefore asked the assessee to explain the nature and source of the two credits aggregating to ₹14,00,000/-.

The assessee submitted that the amount did not belong to her. She submitted that her husband was engaged in the business of purchase and sale of second-hand machinery and the impugned receipts related to his business transactions. The assessee further submitted that her husband had already taken these receipts into account while computing his income and had paid tax thereon. In support of her explanation, the assessee filed the return of income of her husband, his computation of income and his confirmation.

The Assessing Officer did not accept the explanation. He observed that the assessee had not furnished sufficient documentary evidence to establish the nature and source of the credits and treated the explanation as an afterthought. Since the assessee was the first holder of the joint bank account, the Assessing Officer treated the amount of ₹14,00,000/- as unexplained money under section 69A of the Act and assessed the total income at ₹15,44,310/-.

The assessee carried the matter in appeal before the learned CIT(Appeals). The assessee reiterated that the bank account was jointly held with her husband and the impugned receipts belonged to him. She also submitted that her husband had already included the amount while computing his income and had paid tax on the same. The learned CIT(Appeals), however, did not accept the explanation. He observed that the assessee was the first holder of the bank account and her husband was only the second holder. He further held that the assessee had not produced sufficient evidence to establish that the beneficial ownership of the amount belonged to her husband or that the credits were directly connected with his business. The learned CIT(Appeals) therefore upheld the addition of ₹14,00,000/- under section 69A of the Act.

The assessee is in appeal before us against the order passed by the learned CIT(Appeals) dismissing the appeal of the assessee.

We have heard the rival submissions and perused the material available on record. The issue before us is whether the two credits of ₹7,00,000/- each appearing in the joint bank account can be treated as unexplained money of the assessee merely because her name appears as the first holder of that account. The learned Counsel for the assessee drew our attention to the computation of income of the assessee's husband at page 74 of the Paper Book. He submitted that Shri Vasant T. Thakkar was engaged in the business of purchase and sale of second-hand machinery and the impugned receipts were from his business activity. He further submitted that the husband had already included the amount in his computation of income and paid tax thereon. The assessee had also filed the husband's return of income and confirmation before the Assessing Officer.

We find considerable force in the submission of the assessee. The Assessing Officer himself observed in the assessment order that the assessee had produced the return of income, computation and confirmation of her husband. Therefore, the assessee had not merely made a general statement that the money belonged to her husband. She had placed material before the Assessing Officer to support her explanation.

In our view, the fact that the assessee is the first holder of the joint bank account cannot by itself decide the ownership of every amount credited to that account. In a joint account, the particular credit may belong to either of the account holders depending upon its actual source. The Assessing Officer was therefore required to examine the source of the two credits and determine to whom the money actually belonged instead of treating the first holder of the account as the owner of the money merely on that basis.

The mere fact that a person is a joint holder of a bank account does not by itself establish ownership of the money when the surrounding evidence shows that the funds belong to the other joint holder.

Coming to the facts of the present case, the assessee has explained that her husband was carrying on the business of purchase and sale of second-hand machinery and the two receipts were from that activity. More importantly, the computation of income at page 74 of the Paper Book shows that the husband had already taken the impugned amount into account while computing his income. The assessee has also placed on record his return of income and confirmation. The Revenue has not brought any material before us to show that the amount was excluded from the income of the husband or that the disclosure made by him was incorrect.

In the present case, the husband has already included the impugned receipts in his income and paid tax thereon. The Revenue has not shown that such disclosure was rejected in his case or the amount was income of the assessee. The Assessing Officer has also not brought any material to show that the assessee herself entered into the transactions with M/s Jay Traders or the amount was income belonging to her.

In these circumstances, we are unable to sustain the addition merely because the assessee's name appears as the first holder of the joint bank account. The material placed before us shows that the amount was connected with the business of the husband and had already been offered to tax by him. The basic requirement for treating the amount as unexplained money of the assessee under section 69A of the Act is therefore not satisfied.

We accordingly set aside the finding of the learned CIT(Appeals) on this issue and direct the Assessing Officer to delete the addition of ₹14,00,000/-.

In the result, the relevant ground of appeal raised by the assessee is allowed.