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Facts
The assessee, an individual settled in the USA, did not file her income tax return for AY 2014-15. The case was reopened based on information that she sold an immovable property and had significant cash deposits. The Assessing Officer (AO) made additions for disallowed cost of improvement and unexplained cash deposits.
Held
The Tribunal noted that the assessee had furnished some bills, photographs, and bank statements explaining the source of cash deposits. To meet the ends of justice, the case was remitted back to the AO for fresh assessment.
Key Issues
Whether the disallowance of cost of improvement and addition for unexplained cash deposits were warranted, especially when the assessee provided documentation to explain the sources and expenses.
Sections Cited
147, 148, 143(3), 69A
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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI ABY T VARKEY, HON’BLE & SHRI S. R. RAGHUNATHA, HON’BLE
PER S. R. RAGHUNATHA, ACCOUNTANT MEMBER:
This appeal by the assessee is filed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, for the assessment year 2014-15, dated 27.02.2024.
The assessee raised the following grounds of appeal: “1……
:-2-: ITA. No: 1141/Chny/2024 2.On the facts and circumstances of the case, the order passed by the ld. CIT (A) has erred both in law and in facts. 3.On the facts and circumstances of the case, the ld. CIT (A) has erred both in law and facts confirming the action of the ld. AO. 4.On the facts and circumstances of the case, the ld. CIT (A) has erred both in law and facts without giving relief of the indexed cost of improvements over the vacant land held by the appellant since the year 1990 in LTCG computation, namely, construction of compound walls around the land, installing a shed for security guard and gates, etc, which was incurred to safeguard the property, despite submission of supporting documents and explanations. 5.The ld. CIT (A) has erred in confirming the order of the AO, who, vide his order dated 18/12/2019 intended to consider 50% of the claim of cost of improvement, however, the entire cost of improvement (Rs.22,50,418/-) was disallowed. 6.The ld. CIT (A) has erred in not considering the detailed explanation and supporting documents furnished by the appellant to the AO that the cash deposits to the extent of Rs.25,10,000/- made in her Savings Bank account was received from her father- in-law for the purpose of the appellant's daughter's wedding held in December 2014. Since the appellant has explained the nature & source of money, addition made u/s 69 A is not warranted in this case.”
Brief facts of the case is that the assessee, an individual, settled in USA since 1985, has not filed her return of income for the A.Y.2014-15. Based on NMS information on non-filers of ITRs, that during the assessment year. (i) the assessee has sold an immovable property valued Rs.32,02,470/-; & (ii) cash deposits in her SB ale of Rs.25,00,000/- and hence the case was reopened u/s. 147 of the Act and a notice was issued u/s.148 of the Act. In response to the notice,
:-3-: ITA. No: 1141/Chny/2024 the assessee filed her ROI declaring an income of Rs.3,84,850/- for the A.Y.2014-15. Subsequently, the AO concluded the assessment and passed an order u/s.143(3) r.w.s. 147 of the Act on 18.12.2019 with the following additions: i)Claim of cost of improvement disallowed : Rs.22,50,418/- ii)Cash deposits made prior to date of sale : Rs. 3,10,000/- iii)Cash deposits made in SB a/c-u/s 69A : Rs.22,00,000/- The AO observed that the assessee had furnished the sale deed of the immovable property sold and there is no mention of the existence of the building in that document and hence rejected the claim of cost of improvement and disallowed the same. The assessee had not declared the agricultural income in the return of income filed and not explained any other sources of income for deposit of cash into bank accounts, the AO had made an addition of cash deposit u/s.69A of the Act. Aggrieved by the order of AO, the assessee preferred an appeal before the ld. CIT(A).
During the appellate proceedings, the assessee has submitted the details of the issues in Form 35 but not submitted any written submissions and hence the ld.CIT (A) passed an order dated 27.02.2024 by dismissing the appeal of the assessee and confirmed the additions made by the AO.
:-4-: ITA. No: 1141/Chny/2024 Aggrieved by the ld.CIT (A) order, the present appeal is being preferred before the Hon'ble ITAT.
The ld.AR for the assessee stated that the AO and that of the ld.CIT (A) erred making the additions for the impugned assessment year even though the assessee had furnished the details of cash deposit and also the expenditure on cost of improvements of the immovable property. Before us the ld. AR submitted the paper book of 46 pages consisting of copy of the bills spent for improvement, photographs of the immovable property showing the improvements like construction of compound walls, sheds, toilets, roads and land levelling (Paper Book Page No 5 to 19), the copy of bank statements held at SBI to show the details of amounts transferred by assessee to her father. Further, the ld. AR also submitted the letters filed to the income tax department during the course of assessment by explaining the source of cash deposit which has been paid by her father as a repayment of loan (Paper Book Page No 25 and 26). The ld. AR stated that the amount which she had transferred to her father account on last twenty occasions which was refunded by him to her father-in-law which was deposited to her bank accounts cannot be treated as her income and :-5-: ITA. No: 1141/Chny/2024 hence the addition made by the AO does not stand in the eyes of law. Further the cost of improvement made to immovable property has also been explained by the assessee with the proper evidence and hence the disallowance of cost of improvement is also against the law. Therefore, the ld. AR prayed for deleting the additions/ disallowances made by the AO.
Per contra, the ld. DR supported the orders of lower authorities.
We have heard the rival contentions perused the material available on record and gone through the orders of the authorities below. It is admitted fact that the assessee had not filed return of income and based on the information the AO reopened the assessment. The AO found that assessee has not furnished the details of sources for cash deposit of Rs.25,10,000/- and also did not furnish the complete details of the cost of improvements claimed under the head long term capital gains for the sale of immovable property and hence made addition/disallowance while concluding the assessment. The same was confirmed by the ld. CIT(A). We note that the assessee has furnished certain bills and photographs for having
:-6-: ITA. No: 1141/Chny/2024 made improvement to the immovable property which has been sold during the impugned assessment year and also has furnished the details of bank statements by explaining the source of cash deposits. Therefore, to meet the ends of justice, we deem it fit to remit the file back to AO for fresh assessment denovo, by setting aside the order of the ld. CIT(A). The assessee is directed to appear before the AO and produce all the relevant details and documents without seeking unnecessary adjournment.