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Facts
The assessee filed a return of income and was selected for scrutiny. The Assessing Officer made additions of Rs. 20,00,000/- and Rs. 13,20,000/- under Section 68 of the Income Tax Act on account of unexplained cash credits and deposits. The CIT(A) dismissed the assessee's appeal.
Held
The Tribunal held that the addition of Rs. 20,00,000/- warranted fresh verification by the Assessing Officer as the assessee claimed it was on behalf of a company. For the addition of Rs. 13,20,000/- related to marriage gifts, the Tribunal restricted the addition to 50% due to incomplete evidence.
Key Issues
Whether additions under Section 68 for cash credits and gifts are justified without proper verification and evidence, and if a claim of company funds can be sustained.
Sections Cited
143(2), 68
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, LUCKNOW BENCH “A”, LUCKNOW
Before: SHRI KUL BHARAT & SHRI NIKHIL CHOUDHARY
PER KUL BHARAT, VICE PRESIDENT.:
This appeal, by the assessee, is directed against the order of the Learned Commissioner of Income-tax (Appeals)-I, Lucknow dated 18.08.2014, pertaining to the assessment year 2010-11. The assessee has raised the following grounds of appeal: -
“1 That the Ld. AO was wrong in selecting the case under scrutiny which is against the guidelines issued by the CBDT 2. That the notice u/s 143(2) of the Income Tax Act was not issued as per the provisions of law. 3. That the tax authorities were wrong in making following additions to the total income of the appellant:- (a) Rs.20,00,000/- u/s 68 of the Income Tax Act, (b) Rs.13,20,000/- u/s 68 of the Income Tax.
Page 2 of 6 4. That the Ld. CIT(A) was wrong in upholding the additions made by the Ld. AO.
5. That the additions were made without providing opportunity to the appellant to submit evidence in support of his case rendering the impugned order untenable in law.
That the Ld. AO completed the assessment in an arbitrary manner wrong invoking section 68 of the Income Tax Act.
That the Ld. CIT(A) without any justification came to a finding that “the conduct of the appellant is against human probabilities and apparent the said story has been concocted by the appellant to explain the cash deposit Rs.20,00,000/- in his bank account.
8. That the authorities were wrong in making an addition of Rs.13,20 lakh which was received by the appellant at the time of his marriage which is normal activity acceptable in the society.
That the order under appeal is against facts and law and circumstances of the case.
That the appellant craves leave of this Hon'ble Tribunal to add/modify and ground(s) of appeal during the course of the proceedings.”
During the course of hearing, it was noted that the appeal is barred by limitation for one day. The assessee has filed an application seeking condonation of delay in filing of this appeal. The application for condonation of delay is supported by an affidavit of the assessee. The Ld. Sr. Departmental Representative for Revenue did not express any objection to the delay being condoned. Therefore, we condone the delay in filing of this appeal and admit the appeal for decision on merits.
The facts giving rise to the present appeal are that in this case, the assessee filed his return of income on 28.03.2011, declaring total income of Rs.2,84,000/- and agricultural income of Rs.3,25,000/-. Thereafter, the case was selected for scrutiny through Computer Assisted Scrutiny Selection (CASS) and a notice issued u/s 143(2) of the Income Tax Act, 1961 (“Act”, for short) was duly served upon the assessee. In response to the statutory notices, Ld. Authorized Representative of the assessee attended the assessment proceedings. The Assessing Officer (“AO”) while framing the assessment made mainly two additions Page 3 of 6 i.e. addition of Rs.20,00,000/- u/s 68 of the Act on account of unexplained cash credit made by the assessee and further an addition of Rs.13,20,000/- u/s 68 of the Act on account of unexplained cash that was deposited in the bank account of the assessee. Thereby, he assessed income at Rs.36,04,000/- against the returned of income of Rs.2,84,000/-. Aggrieved against this, the assessee preferred an appeal before the Ld. CIT(A), who dismissed the appeal of the assessee and confirmed the additions made by the AO. Now, the assessee is in appeal before this Tribunal.
At the time of hearing, no one attended the proceedings on behalf of the assessee. As there is no representation on behalf of the assessee since quite long time. The appeal was taken up for hearing in the absence of the assessee and is being disposed off on the basis of the material available on record.
The Ld. Departmental Representative (DR) supported the orders of the lower authorities. He contended that the finding of lower authorities is justified since the assessee grossly failed to explain the cash credits and prove the gifts with supporting evidences which he received at the time of marriage.
6. Heard, the Ld. Departmental Representative and perused the material available on record. We find that the Ld. CIT(A) sustained the impugned additions made on account of cash deposited in the bank account of the assessee and another claimed to have been received as the gifts at the time of marriage. The impugned additions have been made and confirmed by the Ld. CIT(A) for want of supporting evidences. The explanation as offered by the assessee that the amount was received on behalf a company in which assessee was a director is treated to be a Page 4 of 6 concocted story in respect of addition of Rs.20,00,000/-. It is stated by the assessee that of Rs.20,00,000/-, the amount was received on behalf of the company namely M/s. Sewa Developers Pvt Ltd. It is also stated that the resolution was passed authorizing the assessee to collect the amount from petty contractors. It was stated that the sum was collected from various petty contractors and deposited in the bank account of the assessee. Thereafter, this amount was duly transferred to the company. Hence, no tax liability could be fastened on the assessee. The Ld. CIT(A) sustained this addition without verifying the correctness of the explanation of the assessee. If, the assessee is able to demonstrate that the amount so collected was duly transmitted to the bank account of company. In that event, it becomes incumbent upon the tax authority to make further enquiry regarding correctness of the claim of the assessee that the amount pertains to the company. No such exercise has been carried out by lower authorities. We, therefore, set aside the impugned order on this issue and restore the issue of taxability of Rs.20,00,000/- in the hands of the assessee to the file of the assessing authority to decide it afresh after verifying the correctness of the claim of the assessee that such amount belongs to the company namely M/s. Sewa Developers Pvt Ltd. It is also noticed that a letter by the M/s. Sewa Developers Pvt Ltd is placed on record by the assessee which confirmed the claim of the assessee that the amount was received by the company. Thus, looking to the totality of the facts, the issue is restored to the Assessing Officer for verification of claim, he would after verifying the correctness of the claim shall decide the issue afresh. Ground raised by the assessee is allowed for statistical purposes.
Page 5 of 6 7. Now coming to the addition of Rs.13,62,325/-, the claim of the assessee is that the amount was received as a gifts from various persons at the time of marriage. The assessee has filed a list of persons who had given cash gifts to the assessee at the time of his marriage. The contention of the assessee has been rejected by the lower authorities purely on the basis that such contention is not supported by any credible evidence and is based upon a concocted story. We do not completely agree with the decision of the lower authorities making and sustaining the addition of the entire amount. It is a common practice that at the time of marriage some gifts in cash or kind is given to the bride groom. Hence such plea of the assessee that he received gifts from the various persons cannot be completely discarded. Looking to the totality of facts and circumstances and in view of the fact that the assessee has supplied only list of persons without giving the complete address and details, the gifts received are estimated to be 50% of the gifts claim by the assessee. We, therefore, restrict the addition to the extent of 50% of the total gifts. This ground of appeal of the assessee is partly allowed.
In the result, the appeal of the assessee is partly allowed for statistical purposes.
Order pronounced in the open Court on 03/04/2025.