GOURI DAS MAITY,PURBA MEDINIPUR vs. INCOME TAX OFFICER-WARD-2, HALDIA, PURBA MEDINIPUR

Grounds No. 1 & 5 raised by the assessee in the appeal for A.Y. 2005-06 are general in nature, which do not call for any specific adjudication. Since Ground No. 2 is not pressed by the ld. Counsel for the assessee at the time of hearing before us, the same is accordingly dismissed. & 2589/KOL./2013 Assessment years: 2005-2006 & 2007-2008 Page 2 of 10

The issue raised in Ground No. 3 of the assessee’s appeal for A.Y. 2005-06 relates to the addition of Rs.1,08,000/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) to the total lincome of the assessee on account of unexplained investment.

The assessee in the present case is an individual, who is working as an Assistant Teacher in Kalyachak A.T. Girls’ High School, Heria, Purba Medinipur. The return of income filed by her for A.Y. 2005-06 on 17.03.2006 declaring total income of Rs.1,52,100/- was initially processed by the Assessing Officer under section 143(1) on 03.05.2006. During the course of assessment proceedings for A.Y. 2007-08, it was found by the Assessing Officer from the information gathered from Contai Cooperative Bank Limited, Barbarisa Branch, Dist. Purba Medinipur that the assessee had made investment in Fixed Deposits/Cash Certificates and had also earned interest income in the year under consideration, which were not disclosed in the return of income. He, therefore, reopened the assessment and issued a notice under section 148 on 04.03.2010, in response to which the return was filed by the assessee on 03.06.2010 declaring total income of Rs.2,11,010/-. During the course of assessment proceedings, the assessee was required by the Assessing Officer to explain the source of investment of Rs.8,00,000/- made during the year under consideration in Fixed Deposits/Cash Certificates. In reply, it was explained by the assessee that the said investment was made partly through maturity proceeds of Fixed Deposits made in the earlier year and partly out of accumulated savings from salary income. From the relevant details filed by the assessee, the Assessing Officer found that the total maturity proceeds of Fixed Deposits amounting to Rs.6,92,000/- were received by the assessee during the year under consideration, which were available for making investment in Fixed Deposits/Cash Certificates. He, however, found that the balance amount of Rs.1,08,000/- stated to be made by the assessee from accumulated salary saving was not supported by any evidence. In this regard, the assessee also could not explain where such saving was accumulated. The Assessing Officer, therefore, treated & 2589/KOL./2013 Assessment years: 2005-2006 & 2007-2008 Page 3 of 10 the investment found to be made by the assessee in Fixed Deposits/ Cash Certificates to the extent of Rs.1,08,000/- as unexplained and added the same to the total income of the assessee in the assessment made under section 143(3) read with section 147 vide an order dated 30.08.2010.

Against the order passed by the Assessing Officer under section 143(3) read with section 147, an appeal was preferred by the assessee before the ld. CIT(Appeals) and after considering the submissions made by the assessee and perusing the relevant material available on record, the ld. CIT(Appeals) confirmed the addition of Rs.1,08,000/- made by the Assessing Officer on account of unexplained investment for the following reasons given in paragraph no. 4 of his impugned order:- “4. The third ground of appeal is against addition of Rs.1,08,000/- under section 69 of Income-tax Act, 1961 being unexplained investment in fixed deposits made by the appellant. It was gathered by the Assessing Officer from Contai Cooperative Bank Ltd., Barbarisa Branch, Dist. Purba Medinipur that the appellant had invested an amount of Rs.8,00,000/- on 25.11.2004/29.11.2004 in nine fixed deposits with the said bank. The appellant when asked to explain the sources, stated that the investment had been made out of maturity proceeds of old fixed deposits of the appellant. The Assessing Officer found that the maturity proceeds of old fixed deposits had been deposited by the appellant in her account no. 2892 with the aforesaid bank and for investment in the new fixed deposits, withdrawal of only Rs.6,92,000/- was made out of the said bank account. Thus the difference of Rs.1,08,000/- remained unexplained. The appellant was given one more opportunity to explain the difference and she stated that the amount of Rs.1,08,000/- was invested out of her accumulated cash savings. The Assessing Officer rejected this explanation as the appellant being a salaried person could not be expected to keep such a huge cash balance idle and the replies given by the appellant were ambiguous. As the appellant was not able to discharge her onus of explaining the difference of Rs. 1,08,000/ -, the same was treated as unexplained investment by the Assessing Officer. During the appellate proceedings, the appellant again contended that she was a salaried person and had drawn total salary income of Rs. 16,56,841/- from the financial year 1997-98 to 2006-07. Most of the household expenses were being met by the husband of the appellant and at a certain point of time, her two sons also became earning members. Hence it was contended that the amount of Rs.1,08,000/ - represented her accumulated cash savings. The appellant's explanation cannot be accepted as she has been maintaining a regular bank account and has made substantial investments earlier which have been claimed to be part of the source of the new & 2589/KOL./2013 Assessment years: 2005-2006 & 2007-2008 Page 4 of 10

We have heard the arguments of both the sides and also perused the relevant material available on record. Although the ld. Counsel for the assessee has reiterated before us the submissions made by the assessee before the authorities below that the amount of Rs.1,08,000/- invested in Fixed Deposits/Cash Certificates was from accumulated savings of the assesese from the salary income, he has not been able to bring any evidence on record to support and substantiate the same. As rightly observed by the authorities below, when the Bank account was regularly maintained by the assessee, savings, if any, from salary income should have reflected or retained there. The assessee, however, has not been able to offer any satisfactory explanation in this regard either before the authorities below or even before us. We, therefore, find no justifiable reason to interfere with the impugned order of the ld. CIT(Appeals) confirming the addition made by the Assessing Officer on this issue and upholding the same, we dismiss Ground No. 3 of the assessee’s appeal.

In Ground No. 4 of the appeal for A.Y. 2005-06, the assessee has challenged the addition of Rs.2,93,213/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of undisclosed interest income.

From the relevant details filed by the assessee during the course of assessment proceedings of the maturity proceeds of Fixed Deposits received during the year under consideration, the Assessing Officer found that the total interest of Rs.3,47,165/- pertaining to the year under consideration, i.e. A.Y. 2005-06 as well as to the immediately five preceding years was received by the assessee in the year under consideration. Out of the same, the assessee in her return of income filed in response to notice under section 148 had declared only the interest & 2589/KOL./2013 Assessment years: 2005-2006 & 2007-2008 Page 5 of 10 income of Rs.53,952/- pertaining to the year under consideration. On verification of the relevant record, the Assessing Officer found that the interest on Fixed Deposits accrued for the earlier years but received in the year under consideration was not offered to tax by the assessee in her returns of income filed for earlier years. He, therefore, added such interest amounting to Rs.2,93,213/- to the total income of the assessee for the year under consideration on receipt basis.

On appeal, the ld. CIT(Appeals) upheld the action of the Assessing Officer on this issue for the following reasons given in paragraph no. 5.1 of his impugned order:- “5.1. I have considered the facts of the case. It is undisputed that the interest of Rs.2,93,213/- had accrued to the appellant during the financial year 1999-2000 to 2003-04. It is also not denied by the appellant that this interest was not shown by her for the purpose of taxation in earlier years. Her contention is that after considering the deduction admissible under section 80L, her income for the earlier years was not taxable and the interest was taxable in her hands on accrual basis. In this regard, the provisions of sub-section (I) of Section 145 are relevant which lay down that income chargeable under the head "income from other sources" shall be computed in accordance with either cash or mercantile system of accounting regularly employed by the assesse. In the appellant's case she has not followed any system of accounting as even in the original return of income for the A.Y. 2005-06, no interest income was declared. If the appellant had made regular declarations of the interest earned by her by way of accrual in the earlier years in the respective returns, it could have been accepted that the interest income should be computed in accordance with mercantile system of accounting i.e. on accrual basis. However the appellant has not made any disclosure of interest income in earlier years and it has been contended that the income for earlier years was exempt. Therefore, what needs to be examined is only whether the appellant is correct in saying that the incomes for earlier years were not chargeable to tax. This contention of the appellant was not proved by her in the assessment proceedings. However from the details given by her of her salary income and the interest income in respect of the aforesaid fixed deposits which was computed by the Assessing Officer, it appears that her income in the earlier years was also taxable. For example, the salary" income for the F.Y. 2003-04 was Rs. 1,76,343/- in addition to which interest of Rs.76,040/- had accrued on the aforesaid fixed deposits. Thus the taxable income for A.Y. 2004- 05 relevant to F.Y. 03-04, after granting deduction under section 80L would amount to Rs. 2,40,383/-, which was clearly above the & 2589/KOL./2013 Assessment years: 2005-2006 & 2007-2008 Page 6 of 10

We have heard the arguments of both the sides on this issue and also perused the relevant material available on record. Although the ld. Counsel for the assessee has submitted before us that interest accrued on Fixed Deposits for the earlier years was not liable to tax in the hands of the assessee in those years on account of her income being below taxable limit and/or because of the deduction available under section 80L, it is observed that a similar stand was taken by the assessee even before the ld. CIT(Appeals), but the same was not accepted by the ld. CIT(Appeals) as a result of the failure of the assessee to support and substantiate the same by furnishing the relevant details and documents. Moreover, in the returns of income filed for the earlier years, interest accrued on Fixed Deposits was not declared by the asseessee and this position is not disputed by the ld. Counsel for the assessee at the time of hearing before us. The interest accrued on Fixed Deposits for the earlier years thus was not declared by the assessee in her return of income on accrual basis and this being the undisputed position, we are of the view that interest on Fixed Deposits was rightly brought to tax by the Assessing Officer in the hands of the assessee for the year under consideration on receipt basis. We, therefore, find no infirmity in the impugned order of the ld. CIT(Appeals) confirming the addition made by the Assessing Officer on this issue and upholding the same, we dismiss Ground No. 4 of the assessee’s appeal. & 2589/KOL./2013 Assessment years: 2005-2006 & 2007-2008 Page 7 of 10 only issue that arises for our consideration from the appeal of the assessee for A.Y. 2007-08 as pressed by the ld. Counsel for the assessee at the time of hearing before us, is relating to the addition of Rs.6,38,000/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of unexplained cash credits under section 68 of the Income Tax Act, 1961.

During the course of assessment proceedings, the assessee was called upon by the Assessing Officer to explain the various credits appearing in her undisclosed account maintained with Contai Cooperative Bank Limited, Barbarisa Branch, Dist. Purba Medinipur aggregating to Rs.10,76,761/-. The explanation offered by the assessee in this regard was not found satisfactory by the Assessing Officer in respect of the credits of Rs.1q,18,000/-, Rs.1,10,000/-, Rs.1,16,000/-, Rs.1,25,000/-, Rs.1,26,000/- and Rs.3,73,000/- appearing in the accounts of the assessee on 10.10.2006,04.12.2006, 04.12.2006, 18.11.2006, 19.12.2006 and 31.03.2007 respectively. He, therefore, treated these credits as unexplained cash credits and added the amount of Rs.10,11,000/- to the total income of the assessee under section 68 of the Act.

The addition made by the Assessing Officer under section 68 was challenged by the assessee in the appeal filed before the ld. CIT(Appeals) and the following submissions were made on her behalf before the ld. CIT(Appeals) to contend that the addition made by the Assessing Officer under section 68 was not sustainable:- “It is reveal from the assessment records of the assessee of the return filed after consideration of standard deduction (whenever is applicable) that the assessee has the income amounting to aggregate of Rs.16,56,841/- of the period of financial year from 1997-98 to 2006-07. The copy the acknowledgements of the return filed is enclosed for your perusal. It is submitted, as also in the above, that most of expenses inclusive of running household/ day to day living is carried by her husband and the most of amount of income of the assessee is accumulated either investing in post office in number of small amount which is matured or kept with & 2589/KOL./2013 Assessment years: 2005-2006 & 2007-2008 Page 8 of 10

The submission made by the assessee was not found fully satisfactory by the ld. CIT(Appeals), who proceeded to sustain the addition of Rs.10,11,000/- made by the Assessing Officer under section 68 to the extent of Rs.6,38,000/- for the following reasons given in paragraph no. 5.3 of his impugned order:- “5.3. I have considered the facts of the case. As regards the amount of Rs.3,73,000/- claimed to have been deposited by Shri Sudipta Maity, the appellant has given sufficient evidence in the form of the bank account statement of Shri Sudipta Maity and his balance sheet to show that the amount had been received by the appellant from Shri Sudipta Maity. The balance sheet makes it clear that as on 31.03.2007, an amount of Rs.3,73,000/- was receivable by Shri Sudipta Maity from the appellant. The bank statement of Shri Sudipta Maity in respect of his overdraft account no. 108296 with Contai Cooperative Bank Ltd., Barbarisa Branch, Dist. Purba Medinipur also shows a withdrawal of Rs.3,73,500/- on 31.03.2007, the date on which Rs. 3,73,000/- have been deposited by the appellant in her own bank account. Whether this amount is in the nature of loan or not and attracts the provisions of section 26988 is not a question pertinent to the main dispute i.e. whether Shri Sudipta Maity has given the said amount to his mother or not. Further whether the appellant needed the amount to be given by Shri Sudipta Maity is also not germane to the issue at hand. The Assessing Officer has not controverted the evidence furnished by the appellant in support of her contention and which was very much available before the Assessing Officer at the time of finalization of the assessment. Therefore, I hold that an amount of Rs.3,73,000/- deposited by the appellant in her bank account had been received from her son Shri Sudipta Maity. As the source of the deposit has been explained, this amount cannot be added & 2589/KOL./2013 Assessment years: 2005-2006 & 2007-2008 Page 9 of 10

We have heard the arguments of both the sides and also perused the relevant material available on record. Although the ld. Counsel for the assessee has reiterated before us the submissions made by the assessee before the authorities below that the source of the credits of Rs.6,38,000/- in her Bank account was on account of maturity proceeds of Post Office Savings Certificates and/or cash savings accumulated out of her salary, there is no evidence brought on record by him to support and substantiate the same. A similar explanation offered by the assessee before the Assessing Officer as well as before the ld. CIT(Appeals) was not accepted by them for want of supporting evidence and since no such evidence is produced by the assessee even before us, we find no justifiable reason to interfere with the impugned order of the ld. CIT(Appeals) sustaining the addition made by the Assessing Officer to the extent of Rs.6,38,000/-. The same is, therefore, upheld dismissing the appeal of the asseessee for A.Y. 2007-08.

In the result, both the appeals of the assessee are dismissed.