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Income Tax Appellate Tribunal, BANGALORE BENCH-SMC “ B ”
Before: SHRI VIJAY PAL RAO
Per Shri Vijay Pal Rao, J.M. : This appeal by the assessee is directed against the order dt. of Commissioner of Income Tax (Appeals) for the Assessment Year 2011-12.
The assessee has raised the following grounds :
3. Ground No.1 is general in nature and do not require any specific adjudication.
4. Ground Nos.2 & 3 are regarding addition on account of unexplained cash deposits in bank account. As per AIR Information received by the Assessing Officer, cash deposit of Rs.26,93,000 was found deposited in the bank account maintained with Bank of India. During the course of assessment proceedings the Assessing Officer asked the assessee to explain the source of the cash deposit. In response the assessee submitted that this bank account is a joint account held in the name of the assessee along with Sri K. Sai Prasad, brother- in-law and Sri V. Venkataramann, elder brother of assessee. Thus it was claimed that the deposit represents the income of HUF of three co-owners.
The assessee also submitted that all three were carrying on the business of Progitham, Mess, Home needs like pickles, papads etc and tailoring earned by three HUF members and deposited in the joint bank account. The Assessing Officer was not convinced with the explanation furnished by the assessee and rejected the same. Accordingly, the Assessing Officer made addition of Rs.26,93,000 as unexplained cash deposit in the S.B. Account. The assessee challenged the action of the Assessing Officer before the CIT (Appeals) and submitted that the deposits in the joint bank account represents the income of the 3 HUF which are also engaged in the Progitham, Mess, Home needs like pickles, papads etc and tailoring. The assessee also referred to the returns of income filed by these three HUF. The CIT (Appeals) was not impressed with the explanation of the assessee and noted that the income declared by three three HUFs is very less and therefore considering the income declared by the HUF in the return of income total amounting to Rs.4,96,184, the CIT (Appeals) confirmed the action of the Assessing Officer in making the addition. It was also observed by the CIT (Appeals) that the assessee has deliberately deposited the cash below Rs.50,000 to avoid flagging of the cash deposit and to escape further investigation. The CIT (Appeals) also rejected the contention of the assessee that only 1/3 rd of the peak cash deposit should have been considered as unexplained income of the assessee.
Before us, the learned Authorised Representative of the assessee has submitted that the assessee is an individual and having income from salary and other sources. He has further contended that there is no dispute that the bank account is in the joint name of three persons and therefore the entire deposit cannot be treated as income of the assessee. He has reiterated the contentions as raised before the authorities below and submitted that the Assessing Officer has wrongly presumed that the deposit belongs to the assessee being the real owner of the bank account in question whereas the Savings Bank Account in question is in the joint names of three persons. He has referred to the return of income filed by three HUF namely the assessee HUF, Sri K. Sai Prasad, HUF and Sri V. Venkataramanan, HUF and submitted that all the three HUF have declared the income from the business of Progitham, Mess, Home needs like pickles, papads etc and tailoring. The learned Authorised Representative has thus submitted that deposit represents gross receipts of the businesses of these three HUF and therefore in any case only 1/3 rd of amount of the deposit can be treated as belonging to the assessee. Further since there is a corresponding withdrawal during the year under consideration therefore only peak deposits may be considered for the purpose of assessment as income. Alternatively the learned Authorised Representative has submitted that since these deposits represents the proceeds therefore only gross profit has to be treated as income. In support of his contention he has relied upon the decision dt.30.12.2009 of the co-ordinate bench of this Tribunal in the case of Sri G.Subbaraya Setty Vs. ITO in ITA No.83/Bang/2009.
On the other hand, the learned Departmental Representative has submitted that the assessee has not produced any evidence to show that the HUF as claimed by the assessee. Further, when the deposits are made below Rs.50,000 then it is clear indication that the assessee has deliberately deposited cash in amounts of less than Rs.50,000 to escape further enquiry. The explanation of the assessee that the source of the deposit from respective HUF cannot be accepted keeping in view of the volume of the transaction and the income declared by these HUF which is very meager and altogether amounting to Rs.4,96,184 whereas the deposit in the bank in cash was found Rs.26,93,000. He has relied upon the orders of the authorities below.
Having considered the rival submissions as well as relevant material on record, it is noted that as per the AIR information, the Assessing Officer found that the cash deposit of Rs.26,93,000 was deposited in the S.B. Account with Bank of India, Vijayanagar, Bangalore. There is no dispute that this bank account in question is maintained in the joint name of the assessee, Sri K.Sai Prasad and Sri V. Venkataramanan. The joint holders of the bank account are relatives of each other however, the assessee claimed that the deposit in the bank account represents business proceeds of thee HUF in the name of assessee, Sri K.Sai Prasad and Sri V. Venkataramanan. The assessee has filed
HUFs. It is pertinent to note that when the said cash in the Savings Bank Account in the joint name of three persons then in the absence of any finding or any other material brought by the Assessing Officer to show on record that all transactions in the bank account has been carried out by the assessee, the entire deposit cannot be treated as income of the one account holder. Further once this amount was found deposited in the joint account of the three persons then in the absence of any specific share of deposit the said amount can be assessed in the hand of AOP comprising of three account holders. There is no evidence or finding that the entire deposit was made by the assessee and belongs to the assessee therefore, the entire deposit in the account cannot be treated as income of the assessee. Further there are a corresponding withdrawals, in the bank account hence, the deposit made on different occasions without considering the corresponding withdrawal cannot be clubbed for the purpose of assessing the income on account of unexplained deposit. Thus only the peak credit can be taken into consideration for the purpose of assessing the income on account of cash deposit in the bank. The Tribunal in the case of G.Subbaraya Shetty Vs. ITO (supra) has held in para 8.2.2 as under :
“8.2.2 After due consideration of all relevant facts and circumstances of the issue, the forceful submissions of the ld. AR and also with respects to the finding of the Hon'ble jurisdictional High Court referred supra which has been extensively quoted by the Hon'ble Tribunal in its decision cited, we are of the unanimous view that the only recourse available to meet the end of justice without further complicating the issue and ending up with cumbersome process is to work out the taxable income on peak credits. The ld. AR has also relied on the finding of the Hon'ble jurisdictional High Court referred supra and also the decision of this Hon'ble Tribunal in – Jagannatha Shetty V. ITO. In the interest of natural justice and to avoid further litigation process and following the ratio of the case laws cited supra, we remit back the issue on the file of the Assessing Officer with a specific direction to work out the taxable income in pursuance of peak credit method and to conclude the assessment, after affording a reasonable opportunity to the assessee of being heard. It is ordered accordingly.”
Therefore the Assessing Officer is directed to consider only the peak deposit in the S.B. Account for the purpose of assessing the income. Further since the account is in the name of three joint account holders therefore only 1/3 rd of the peak credit can be assessed in the hand of the assessee.
As regards the claim of the assessee that this represents the business proceeds of the 3 HUFs it is noted that the assessee has not furnished any evidence in support of the claim except the return of income wherein the income was declared on estimate basis without mainlining the book of accounts therefore, the said contention of the assessee cannot be accepted. In view of the above, the order of the authorities below are set aside and the Assessing Officer is directed to assess only 1/3 rd of the peak credit.
Ground No.4 is regarding addition of Rs.39,265 as interest income.
The Assessing Officer has found that the assessee has not offered the interest income of Rs.39,265 from the deposit to tax. Accordingly, the Assessing Officer made addition. On appeal, the CIT (Appeals) has decided this issue in para 9 as under :
“ 9. Ground No.4 of the appeal is with regard to the addition of Rs.39,265/- made as unaccounted interest received by the appellant from the FDs and the bank account. The Assessing Officer has observed that the appellant has not disclosed interest from the SB account and the fixed deposits totally amounting to Rs.39,265. The appellant has not contradicted these findings of the Assessing Officer. The appellant has also not claimed that the interest as stated above was disclosed by the appellant. Therefore, considering the specific findings made by the Assessing Officer, the addition of Rs.39,265 is found to be legally correct and is accordingly upheld. The ground of appeal raised in this regard is dismissed.”
Before the Tribunal nothing has been produced to show that the assessee has already offered this income of Rs.39,265. However if this interest income is pertaining to the deposits in the joint Savings Bank Account, then only 1/3 rd of the same can be added to the income of the assessee.
Accordingly, the Assessing Officer directed to verify the same and assess the interest income as indicated above.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 13th April, 2017.