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Income Tax Appellate Tribunal, DELHI BENCH : F : NEW DELHI
Before: SHRI R.S. SYAL & SMT. BEENA A. PILLAI
(Appellant) (Respondent) Appellant by : Shri Jayant Bothra & Ms Ravneet Kaur, CAs Respondent by: Shri Ravi Kant Gupta, Sr.DR Date of Hearing : 09.08.2018 Date of Pronouncement: 10.08.2018 ORDER PER R.S. SYAL, VP: This appeal by the assessee is directed against the order passed by the CIT(A) on 01.01.2015 in relation to the Assessment Year 2011-12.
The first ground is against the confirmation of disallowance of Rs.10 lac made by the Assessing Officer u/s 68 of the Act.
Briefly stated, the facts of the case are that the assessee is an individual, retired personnel of the Indian Army, engaged in proprietary business of security, housekeeping, etc. A return was filed declaring total income of Rs.48,36,820/-. During the course of assessment proceedings, it was observed by the AO that a sum of Rs.10 lac was deposited in the assessee’s bank account maintained with State Bank of Bikaner & Jaipur.
On being called upon to explain the source of such cash deposit, the assessee submitted that the cash of Rs.10 lac was deposited out of cash withdrawals of Rs.15 lac made two months ago. On perusal of bank statement, the Assessing Officer observed that the cash of Rs.15 lac stated to have been withdrawn by the assessee two months ago, in fact, represented cheques issued in the name of Mudit and Vikash. He, therefore, made an addition of Rs.10 lac. During the course of first appellate proceedings, the assessee filed additional evidence in the shape of bank certificate stating that the two cheques were self paid. The ld. CIT(A) refused to admit the additional evidence and confirmed the addition, against which the assessee has come up in appeal before the Tribunal.
We have heard both the sides and perused the relevant material on record. It is seen that the assessee withdrew a sum of Rs.10 lac on 18.03.2010 and a further sum of Rs.5 lac on 25.03.2010 through its employees, namely, S/Shri Mudit and Vikash. The cash deposits of Rs.5 lac each were made on 27.05.2010 and 28.05.2010. We have gone through the copy of cash book from 15.03.2010 onwards, which evidences that the amounts withdrawn were taken to the books of accounts, out of which a sum of Rs.12,50,000/- was taken by the proprietor as drawings. A sum of Rs.5 lac was re-deposited on 27.05.2010 by the proprietor. A close scrutiny of such details indicates that the assessee had cash of Rs.10 lac from the withdrawals made, which amount was re-deposited in the bank account on 27/28.05.2010. Thus, the source of deposits in the bank account is explained. We, therefore, order to delete the addition of Rs.10 lac.
The second ground is against the confirmation of addition of Rs.65,29,238/- u/s 28(iv) of the Act. The facts apropos this issue are that the assessee made an addition of Rs.1,25,82,605/- to his capital account.
From the ledger, it was observed that the assessee was shown to have received a gift of Rs.27 lac from his wife Smt. Laxmi Devi, Rs.16 lac from his daughter-in-law, Mrs. Meena Sharma and Rs.22,29,238 from his son, Shri Sunil Sharma. On being called upon to substantiate the genuineness of the gifts, the assessee filed his ledger accounts for two years along with balance sheets and audit reports for the Assessment Year 2009-10 and 2010-11, which indicated outstanding unsecured loans taken by the assessee from these persons which were accepted as gifts in the year in question. The Assessing Officer invoked section 27(iv) and made an addition of Rs.65,29,238/-. The ld. CIT(A) upheld the addition by treating the amount as covered u/s 41(1) of the Act.
We have heard both the sides and perused the relevant material on record. There is no quarrel on the fact that the amount credited to the assessee’s capital account as gifts was through journal entries representing conversion of the credit of the amounts appearing in the assessee’s books of account from earlier years as unsecured loans received from his wife, son and daughter-in-law. It is an admitted position that the assessee did not pay any interest on such unsecured loans in the preceding or in the current year.
Under such circumstances, the provisions of section 41(1) can’t be attracted. It is further clear that the receipt of gifts cannot be construed as the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession in terms of section 28(iv) of the Act. We, therefore, order to delete the addition as the source of credit to capital account is duly proved and the same is not in the nature of income.
In the result, the appeal filed by the assessee is allowed.
The decision was pronounced in the open court on 10.08.2018.