LINGARAJ BASAVANEPPA KUNNUR,DHARAWAD vs. INCOME TAX OFFICER WARD-1(2), HUBLI

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ITA 1792/BANG/2017Status: DisposedITAT Bangalore24 January 2018AY 2008-094 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that deposits made up to March 31, 2007, in the pigmy accounts cannot be added in the current assessment year. The matter was restored to the AO for fresh decision regarding deposits made in the current year and interest credited.

What were the facts?

The assessee's appeal concerns an addition of Rs. 6,42,249/- made on account of maturity of pigmy deposits. The assessee claimed the source was cash withdrawn from a firm managed by him, which was rejected by the lower authorities.

What were the issues?

Whether additions can be made in the current year for deposits made in earlier years, and the validity of the AO's rejection of the assessee's explanation for the source of funds.

Which sections of the Income-tax Act were involved?

Section 69,Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC-C” BENCH : BANGALORE

Before: SHRI ARUN KUMAR GARODIA

For Appellant: Shri P. Dinesha, Advocate
For Respondent: Shri Vimal Anand, Addl. CIT (DR)
Hearing: 19.01.2018Pronounced: 24.01.2018

O R D E R

Per Shri A.K. Garodia, Accountant Member

1.

This is an assessee’s appeal directed against the order of ld. CIT(A), Hubli dated 03.07.2017 for Assessment Year 2008-09.

2.

The revised grounds raised

by the assessee are as under.

1. The authorities below have grossly erred in not properly appreciating the facts vis-à-vis the explanation offered by the appellant with supporting ledger, hence the addition made by the AO and confirmed by the CIT(A) is bad and liable to be deleted.

2. The CIT(A) ought to have appreciated that when the source was traced to the Firm namely Kaveri Bar &Restaurant, S. 69 had no role more so, when clearly the said Firm had confirmed the investment.

3. Without prejudice, the CIT(A) ought to have appreciated that the AO having found that the appellant had opened FDs by withdrawing from bank account, no further explanation was required as to its source.

4. Without prejudice, both the authorities below grossly erred in not appreciating that the appellant had pygmy deposits; withdrawn and redeposited all in the bank account duly documented and hence both the additions under S. 69 & S.68 were bad and unsustainable.”

3.

It is submitted by ld. AR of the assessee that issue in dispute is regarding the addition of Rs. 6,42,249/-. He submitted that it is noted by the AO in the assessment order in para no. 3 that as per the statement of account furnished by the bank authorities, it is seen that on 12.10.2007, two amounts are credited to the extent of Rs. 541,815/- and Rs. 1,00,434/- totaling to Rs. 6,42,249/- realized on maturity of pigmy deposits. He submitted copy of bank statement of these two pigmy deposits amounts in account nos. 8928 and 8829. He submitted that in the pigmy deposit account no. 8928, total deposit up to 12.10.2007 was Rs. 5,41,815/- including interest for the present year of Rs. 9,515/- but the deposit up to 31.03.2007 was Rs. 3,84,300/-. He submitted that at least to the extent of deposit up to 31.03.2007, no addition can be made in the present year even if the assessee’s explanation for source is not accepted. Similarly, he pointed out that in the second pigmy account no. 8829, total deposit up to 12.10.2007 is Rs. 1,00,434/- including interest for the present year of Rs. 3,974/- but the deposit up to 31.03.2007 was Rs. 77,960/- and therefore, no addition can be made in the present year in respect of deposit up to 31.03.2007 even if it is held that the explanation of the assessee regarding the source of deposit is not acceptable. Regarding the deposit in the present year and interest credited by the bank in the present year, he submitted that the matter may be restored back to the file of AO for fresh decision after considering the explanation of the assessee in this regard because as per the present assessment order, no question was asked regarding the source of deposit in pigmy bank account and therefore, the issue should be restored back for fresh decision in the interest of justice. The ld. DR of revenue supported the order of CIT(A).

4.

I have considered the rival submissions. I find that in para no. 5 of the order of CIT(A), it is noted that regarding the source of cash deposit, the explanation was submitted that the assessee who was managing M/s. Kaveri Bar & Restaurant, was withdrawing cash from the books of the said concern on a day to day basis and deposited the same in pigmy deposit account in his name.

This explanation was rejected by CIT(A) on this basis that if this is correct then the FDs should have been appearing in the asset side of balance sheet of M/s. Kaveri Bar & Restaurant. In my considered opinion, in the facts of the present case, this matter should go back to the file of AO for fresh decision after examining the explanation of the assessee regarding the source of deposit in pigmy bank accounts. At the same time, I hold that to the extent of deposit made in those two pigmy deposit accounts up to 31.03.2007, no addition can be made in the present year even if it is held that the sources of such deposits in pigmy bank account is not acceptable because in that event also, the addition can be made in the year of deposit and not in the present year. Hence, to that extent, the addition is deleted.

5.

Regarding the cash deposit in pigmy deposit accounts in the present, I restore the matter back to the file of AO for fresh decision after calling for the explanation from the assessee regarding the source of deposits and after deciding that issue by way of a speaking and reasoned order as to how and why the explanation of the assessee is not acceptable. In respect of the interest credited by bank in the present year, if it is found that the money belong to the assessee then the addition to the extent of interest should definitely be made in the present year but if it is found and accepted that the money belongs to a different person i.e. M/s. Kaveri Bar & Restaurant then no addition can be made on account of interest also in the hands of the present assessee. The AO should pass necessary order as per law in the light of above discussion after providing adequate opportunity of being heard to the assessee.

6.

In the result, the appeal filed by the assessee stands allowed for statistical purposes. Order pronounced in the open court on the date mentioned on the caption page.

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