LATE SHRI PRAVIN V. KACHARIA THROUGH LEGAL HEIR HIREN P. KACHARIA,MUMBAI vs. ITO 25(3)(3), MUMBAI

The AO received AIR information to the effect that the assessee has deposited a sum of Rs.10,11,700/- in The Saraswat Co-op Bank Ltd and Rs.42,95,850/- in State Bank of Saurashtra. The AO assessed the aggregate cash deposits as income of the assessee. The AO also noticed that the assessee was in possession of three residential flats. Hence the AO computed deemed rental income in respect of two flats at 7% of value of investments made in the flats. The Ld CIT(A) confirmed both the additions and hence the assessee has filed this appeal before us.

With regard to the first issue, the Ld A.R submitted that the assessee had filed a letter dated 02-02-2012 before Ld CIT(A) seeking telescoping benefit of withdrawals made from the bank account. He submitted that the Ld CIT(A) has passed the impugned order without considering the prayer of the assessee. He submitted that the assessee has since expired and the legal heirs are prosecuting this appeal and they do not have knowledge of transactions carried on by the assessee. He submitted that, in the interest of natural justice, the Ld CIT(A) should have given telescoping benefit for withdrawals made from the bank accounts. With regard to the determination of annual letting value (ALV) for deemed to be let out properties, the Ld A.R submitted that this issue has to be decided on the basis of decision rendered by Hon’ble jurisdictional High Court in the case of Tip Top Typography (2014)(48 Taxmann.com 191).

On the contrary, the Ld D.R submitted that the Ld CIT(A) has confirmed the addition of cash deposits by following the decision rendered by Hon’ble Supreme Court in the case of A Govindrajulu Mudaliar (34 ITR 807) and annual value of deemed to be let out properties was determined by following the decision rendered by Hon’ble Allahabad High Court in the case of Radhadevi Dalmia Vs. CIT (1980)(125 ITR 134).

We heard the parties and perused the record. With regard to the first issue, there should not be any dispute that the principles laid down by Hon’ble Supreme Court in the case of A.Govindarajulu Mudaliar (supra) should be followed. The plea of the assessee is that there were deposits and withdrawals made in a repeated manner in the bank accounts and hence the sources for subsequent deposits may be taken as the previous withdrawals. Accordingly it has been pleaded that the peak deposit amount may be assessed as income. We notice that the said plea has not been addressed by Ld CIT(A). Accordingly we are of the view that this issue requires fresh consideration at the end of the Ld CIT(A). 7. With regard to the determination of annual letting value (ALV) of deemed to be let out properties, we have noticed that the Ld CIT(A) has followed the decision rendered by Hon’ble Allahabad High Court. However, the assessee has pointed out that the ALV should be determined as per the decision of Hon’ble jurisdictional High Court rendered in the case of Tip Top Typography (supra). There should not be any dispute that the decision rendered by jurisdictional High Courts is binding on all the authorities below it. Accordingly we are of the view that this issue also requires fresh examination at the end of Ld CIT(A).

In view of the foregoing discussions, we set aside the order passed by Ld CIT(A) on both the above said issues and restore them to his file for examining them afresh in the light of discussions made supra. Needless to mention, the assessee should be given adequate opportunity of being heard.

In the result, the appeal of the assessee is treated as allowed for statistical purposes. Order pronounced in the open court on 1st November, 2016.