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Income Tax Appellate Tribunal, DELHI BENCH “G ”: NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI PRASHANT MAHARISHI
O R D E R PER PRASHANT MAHARISHI, A. M. 1. This is an appeal filed by the assessee against the order of the ld CIT (A)- XI, New Delhi dated 16.12.2013 for the Assessment Year 2009-10. 2. The assessee has raised the following grounds of appeal:- “1. That the assessment order is against law and facts and is based on wrong interpretation of the facts of the case and is liable to be struck down.
2. The disallowance of Rs. 5,34,000/- is against the facts of the case that the assessee had received gift of money from his wife, out of the funds in her possession from the estate of her deceased grandfather, of which she was appointed the executor for the benefit of her mother. It is clear from section 56 gift of money received by the assessee from his wife, who falls under the definition of “Relative” given in section 56(2)(vi) has no tax treatment in the hands of the assessee.
3. The disallowance of standard deduction u/s 24A of Rs. 1,80,000/- out of rent received of Rs. 6,00,000 is not correct as correctly mentioning the status of the property i.e. Self occupied or let out at the time of payment of Municipal Taxes is not required. The property is partly let out and partly self occupied, Hence mentioning the property as self occupied instead of let out had no impact on the quantum of Municipal taxes.” Page | 1
3. Assessee is engaged in the business of selling flowers and carnations to and had provided consultancy in relation to floral decoration. He is also allegedly earning rental income. He filed his return of income for Rs. 702063/- on 7/08/2009. The assessment under section 143 (3) was passed on 26/12/2011 wherein an addition because of unexplained cash credit of Rs. 11,34,000/– as unexplained credit in bank account and of Rs. 6 Lacs was made. Income was assessed at Rs. 2466063/-.
4. Assessee aggrieved with the order of the Ld. Assessing Officer preferred an appeal before the Ld. CIT (A) who sustained the addition of Rs. 5 34000/– on account of unexplained cash deposited in the bank account of the assessee and further reduced the addition of Rs. 6 Lacs to Rs. 1.8 lakhs denying deduction u/s 24A of the act. He further deleted the double addition made by the Ld. assessing officer. 5. Assessee aggrieved with the order of the Ld. CIT (Appeal) preferred appeal before us contesting the addition of Rs. 5.34 Lacs and 1.8 lakhs. 6. With respect to the ground No. 1 on account of addition of Rs. 534000/- the assessee submitted that assessee had received the gift of money from his wife, out of the funds in her possession from the estate of her deceased grandfather, of which she was appointed the executor for the benefit of her mother. According to assessee, it is clear from section 56 of the act that gift of money received by the assessee from his wife, who falls under the definition of relative has no tax treatment in the hands of the assessee. Before the assessing officer assessee stated in letter dated 23/12/2011 that the grandfather of the wife of the assessee had left larger number of movable and immovable assets wherein by will assessee’s wife was made the executor. The above cash was received from her on this account. For this assessee submitted the copy of the will executed. The Ld. assessing officer disbelieved it stating that the will was made for the benefit of the mother of the wife of the assessee Mrs. Prabha, hence all movable and immovable property was for the benefit of the mother of the assessee’s wife and not for the assessee or his wife. Before the Ld. CIT (A) The assessee reiterated the same submission and further stated that as it is a gift of money from the wife the amount cannot be charged to tax under section 56 (2) (vi) of the act. The Ld. CIT (A) held that though the assessee’s wife was the executor of the will of her grandfather, but there is no evidence that Rs. 5 34000/- was received by the assessee’s wife from her mother and given to the assessee for depositing the same in his bank account. He further held that there is no evidence on record, which could establish that wife of the assessee, got any money in cash. He further held that appellant tried to take benefit of legal document available with his wife but failed to establish any nexus of receiving cash from such execution of the will. He therefore confirmed the addition of Rs. 534000/– as cash deposits in the bank account of the assessee as unexplained cash credit.
The Ld. authorized representative reiterated the same facts before us and further stated that lower authorities have not brought any adverse material on record to rebut the submission of the assessee of receipt of cash from the wife of the assessee, which was received by him from his wife. It was further argued that Ld. assessing officer has never required the assessee to produce his wife to testify the same. He further pressed upon section 56 of the income tax act to say that wife is relative of the assessee and therefore even if the money is received from his wife it cannot be taxed in the hands of the assessee.
The Ld. departmental representative vehemently supported the orders of the lower authorities and submitted that assessee has failed to prove the source of the amount of Rs. 534000/– received by the assessee as deposited in cash in his bank account. He further referred to the order of the Ld. CIT (A) wherein he has given detailed reasons for confirming the above addition under section 68 of the income tax act. He further stated that section 56 and section 68 are operating in two different fields and therefore they cannot be stated to be related to each other. He further stated that it is no where provided in the act that if the amount of gift received from a relative where nature and sources not explained by the assessee, it cannot still be charged in the hands of the assessee under section 68, taking shelter under section 56 of the act. Page | 3
We have carefully considered the rival submissions and considered the order of the Ld. Lower authorities. The facts have already been described above. The assessee has deposited the sum of Rs. 5 34000/– in cash in his bank account and he tried to explain that above sum has been received by the wife of the assessee on account of will of her grandfather. The assessee has produced copy of will of Mr. Ram Mehrotra, which is placed at page No. 31 of the paper book and where the detailed properties available with him are mentioned. In such list in movable property there is no reference of any cash available with that gentleman. Assessee has not shown that how much cash was available, when he died and where the money was lying till the date of deposit in the bank account of assessee. Further, the lower authorities have given, detailed reasons as assessee failed to show any amount of cash available with his wife for deposit in bank account of assessee and hence upheld the addition. Furthermore, with respect to interrelationship between section 56 and section 68, we are of the view that even if the sum is received from relative and if assessee fails to prove the nature of such income and source of such amount then addition can be made under section 68 of the act. If the assessee proves the nature of such income to be gift and the relative has capacity to make such gift, then only income falls in the category of income specified under section 56 of the act and its exemptions. Therefore, We find no infirmity in the orders of the lower authorities in making the above addition of Rs. 534000/– in the hands of the assessee, which is representing cash deposited by the assessee in his bank account for which he failed to prove the source. Therefore, we confirm the finding of the lower authorities and dismiss ground No. 2 of the appeal of the assessee.
This ground No. 3 of the appeal is with respect to the addition of Rs. 1,80, 000/– sustained by the Ld. CIT (A) in the hands of the assessee on account of denial of deduction u/s 24A of the act out alleged rental income shown by the assessee. The assessee has shown rental income of Rs. 6 Lacs but the assessing officer made the addition treating the rental receipt during the year as shown by the appellant treating it as bogus as Page | 4 evidence on record, which is municipal tax receipt which showed that the property was self occupied. Subsequently the rent agreement was executed on 29/4/2009 and there is no evidence on record that there was any oral agreement for rent executed prior to that. The entire transaction of rent was received in cash by the assessee, therefore it raised the suspicion in the mind of the Ld. assessing officer, and therefore he treated the same as any ingenuine transaction and made the addition. The Ld. CIT (A) also stated that the municipal receipt clearly mentions the property as self-occupied. Therefore, he was of the opinion that the appellant deliberately wanted to hide the fact of self-occupancy of the house from the tax authorities for claiming deduction u/s 24A of the act. He further held that the appellant has shown rental receipt in respect of the property twice at Rs. 3 lakhs each as if the appellant was getting rent from two portions of the house, however, in the submission it was stated by the appellant that he received rent at the rate of Rs. 50,000 per month from a single tenant. Further, in the rental agreement also there was no reference of any already existing tenancy with the same tenant. He therefore held that it clearly establishes that there was no genuine rental income in the hands of the appellant during the year and such income has been shown just to explain the cash deposits in the bank account, which were unexplained. He therefore did not grant deduction under section 24A of the act amounting to Rs. 180,000 claimed by the assessee.
The Ld. authorized representative submitted that the assessee is receiving rent in respect of the 1st floor of the house regularly and the Ld. assessing officer never required, the assessee either to produce the tenant or he ever summoned him to reject the claim of the assessee that the amount received did not represent rental income. He further reiterated the same submission, as were made before the lower authorities.
The Ld. departmental representative vehemently stated that assessee has disguised his cash deposit in his bank account as rental income and claimed deduction under section 24A of the income tax act merely to Page | 5 reduce the tax incidence. He therefore vehemently supported the orders of the lower authorities and stated that the disallowance of the claim made by assessee under section 24A of the income tax is not allowable to the assessee as assessee has failed to prove that the property of the assessee was on rent during that period pertaining to the assessment year.
We have carefully considered the rival contentions and perused the orders of the lower authorities. In the present facts of the case, the assessee has shown rental income of Rs. 6 Lacs and further claimed deduction under section 24A of Rs. 180,000/– from that particular income and balance income was shown as income from house property. However, the assessee failed to prove before the lower authorities that the assessee has rented out his property and therefore the lower authorities have confirmed that assessee is not entitled to deduction under section 24A of the income tax act. The lower authorities have given a reason that the house tax receipts shows that the assessee’s house is self occupied and not rented. The assessee could not give any plausible explanation for the same. Further, the assessee also could not produce any confirmation from the tenants of the house property to show that they have paid rent to the assessee for the period pertaining to the assessment year. The rental agreement executed by the assessee on 27/04/2009 is specifically stating that the lease commences from 01/05/2009 and ending on 31/3/2010. Therefore, apparently the lease agreement does not pertain to the impugned assessment year. Further the argument of the Ld. authorized representative that assessing officer has not made any enquiry is devoid of any merit because it is for assessee to support his return of income when he has shown income from house property, he must show who is the tenant for the particular period and also what amount of rent is paid to the assessee. This evidences assessee himself has failed to provide before the lower authorities. Therefore, there cannot be any fault lies on the shoulder of the lower authorities. In view of the above facts where the assessee has failed to prove the source of rental income assessee cannot be granted deduction under section 24A of the income Page | 6