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Facts
The assessee, an agent for Idea Cellular Ltd., faced additions by the AO for cash deposits made during demonetization, treated as undisclosed income, and an estimated profit based on Form 26AS. The assessee contended that the cash deposits were gifts from close relatives to start a new business and her commission income was below the taxable limit. The Ld. CIT(A) dismissed the appeal, rejecting the gifts as an "afterthought."
Held
The Tribunal held that the Ld. CIT(A) erred by not accepting the confirmation letters from relatives and by dismissing the appeal without conducting a proper enquiry, especially given the assessee was a new entrepreneur and the amounts were meagre. The Tribunal set aside both the addition under Section 69 related to gifts from relatives and the addition of Rs. 79,580/- for the difference in amounts deposited/transferred.
Key Issues
Whether cash deposits claimed as gifts from relatives for a new business could be treated as undisclosed income under Section 69, and whether the Ld. CIT(A) erred in dismissing the appeal without proper enquiry into the evidence provided by the assessee.
Sections Cited
142(1), 69
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Income Tax Appellate Tribunal, COCHIN BENCH : COCHIN
Before: SHRI INTURI RAMA RAO & SHRI SOUNDARARAJAN K.
ORDER PER SOUNDARARAJAN K., JUDICIAL MEMBER
This is an appeal filed by the assessee challenging the order of the NFAC, Delhi dated 28/06/2024 in respect of the A.Y. 2017-18.
The assessee is an agent for the Idea Cellular Ltd. and earned income through the commission received by him. Based on the information received from the banks, the AO issued a notice u/s. 142(1) to furnish the return of income. The AO also sought for an explanation about the cash deposited during the demonetisation period. The assessee had not responded to any of the notices and therefore the AO got the details from the banks and calculated the income earned by the assessee from undisclosed sources. The AO had also taken the deposits made into the current account and treated the said income also from undisclosed sources. Similarly, the AO had estimated the profit based on the Form 26AS. As against the said order, the assessee filed an appeal before the Ld.CIT(A). The assessee submitted that she had started the new venture and therefore got monies from her close relatives and therefore the said amount could not be treated as income earned through the undisclosed sources. Similarly, the assessee submitted that the commission amount received as per Form 26AS is Rs. 1,52,387/- which is below the taxable limit and therefore no return of income was filed during the year. The Ld.CIT(A) based on the written submission filed by the assessee, had disposed of the appeal by dismissing the same. As against the said order, the assessee is in appeal before this Tribunal.
At the time of hearing, the Ld.AR submitted that the addition made u/s. 69 of the Act based on the deposits made into the current account are nothing but the amounts received from the close relatives for which the assessee had filed the confirmation letters from the said relatives. The Ld.AR further submitted that the amounts deposited into bank account are received from her mother-in-law and brother-in-law in order to start the new business and therefore it could not be treated as income arrived from the undisclosed sources. Insofar as the other addition based on the deposit and the transfer to the Idea Cellular Ltd., apart from the sale of talk time, the assessee had also effected sale of other items and therefore naturally the amount collected would be more than the amount transferred to Idea Cellular Ltd.
The Ld.AR therefore submitted that the Ld.CIT(A) had wrongly dismissed the appeal even though the assessee had submitted the necessary documents before it.
We have heard the arguments of both sides and perused the materials available on record.
It is a fact that the assessee had started the new venture for which she opened a current account in which the amounts gifted by her brother- in-law and mother-in-law were deposited in order to transfer the said amount to Idea Cellular Ltd. towards the advance payment. In support of her contention, before the Ld.CIT(A) the assessee had furnished the confirmation letters from the mother-in-law and brother-in-law. The brother-in-law of the assessee is a non-resident Indian employed in Dubai. The another deposit was from the assessee’s mother-in-law who is residing in India. The assessee had contested the issue before the AO that the deposits are not from the undisclosed sources but only from the relatives of the assessee and therefore in support of her contention, the assessee filed the confirmation letters from the said two relatives. But unfortunately, the Ld.CIT(A) had observed that “the appellant has failed to file the return of income and since the gifts were received from family members, the above-mentioned letters submitted before the under signed seems to be a after thought process of escapement of income.”
Therefore the Ld.CIT(A) had not accepted the claim of the assessee. We are of the view that it is not an afterthought since the assessee had contended right from the assessment that these amounts are received from the relatives. Further, as seen from the Form 26AS, during the year the assessee had earned an income of Rs. 1,52,387/- which is below the taxable limit and therefore the assessee might have thought that there is no requirement to file the return of income. In any event, the non-filing of return that too during the first year of business, the confirmation letters furnished by the assessee could not be doubted unless and otherwise the department has any other evidence to prove that the assessee was having other incomes. Admittedly, the assessee had explained that these are all the amounts received from other relatives and the AO had also not verified the same. When the assessee was able to produce the confirmation letters from the said relatives, the Ld.CIT(A) refused to believe the letters and confirmed the addition made u/s. 69 of the Act. We have also seen that the Ld.CIT(A) had observed that no supporting documentary evidence were filed by the assessee in support of the confirmation letters. If the assessee has not produced any supporting documents like the bank accounts of the relatives, the Ld.CIT(A) could have very well remitted the matter to the AO for conducting a detailed enquiry and thereafter pass a speaking order. Instead of doing so, the Ld.CIT(A) had dismissed the appeal which in our opinion is not correct.
We therefore set aside the order of the Ld.CIT(A) in so far as the addition made u/s. 69 of the Act is concerned. We are also saddened to note that the assessee is not a big business entrepreneur but only started business during the disputed year and the amount involved is only a very meagre amount and in such circumstances, the assessment ought to have been made by verifying the details after conducting proper enquiry. In such circumstances, we are allowing the appeal filed by the assessee.
Considering the entire facts and circumstances of the case and the amount involved in this appeal, we are not inclined to remit the matter to the file of the AO. In the result, the appeal filed by the assessee insofar as the addition made u/s. 69 is deleted.
Insofar as the addition of Rs. 79,580/-, the assessee submitted that apart from the sale of talk time, the assessee had also dealt with other goods and therefore there would be difference to the amount deposited and transferred to Idea Cellular Ltd. This fact was also not considered by any of the authorities. Since the disputed addition is only a minimal amount, we
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 23rd April, 2025.