SATHYANARAYANA SAKA,SOMESWARAM vs. ASSESSING OFFICER, KAKINADA

Facts

The assessee, a brick manufacturer, did not file an Income Tax Return for AY 2014-15. His assessment was reopened due to unexplained cash deposits of Rs. 26,45,000/- in a bank account held by Shri Makindi Srinivas but admitted to be operated by the assessee. The AO and CIT(A) made/sustained an addition under Section 69A in the assessee's hands, while the AO also made a substantive addition for the same amount in Shri Makindi Srinivas's hands.

Held

The Tribunal observed that making substantive additions for the same income in the hands of two different persons is contrary to settled law. It found that the AO erred by making a substantive addition in the assessee's hands without clear evidence of beneficial ownership and simultaneously making an addition in the bank account holder's hands. The case was remanded to the AO to properly ascertain the bank account's ownership and reconsider the assessment.

Key Issues

Legality of making substantive additions for the same unexplained cash deposits in the hands of both the assessee and the bank account holder, and the proper ascertainment of the beneficial ownership of the bank account.