2014 (1) TMI 488 - AT - Income Tax

Tribunal upholds decision on undisclosed income, allows 80C deduction

ITO. New Delhi Versus Ishwar Singh Vats

The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decision to not add Rs.12,28,000 under section 68 of the Income Tax Act as income from ... Addition on account of cash deposits in bank account – Held that:- Though, there is a gap between withdrawal of money and deposit of the same in the bank, it can not be said that amount deposited in the bank remained unexplained - The deduction allowed by Ld. CIT(A) u/s 80C for an amount of Rs.1,00,000/- was based upon form no-16 issued by employer of assessee – Decided against Revenue. Issues Involved:1. Addition of income under section 68 of the Income Tax Act based on deposits in the bank account.2. Rejection of claim under section 80C for lack of evidence of investments.Issue 1: Addition of income under section 68 of the Income Tax Act based on deposits in the bank account:The appellant, a revenue authority, contested the order of the CIT(A) regarding the addition of Rs.12,40,000 under section 68 of the Income Tax Act as income from undisclosed sources. The appellant argued that there was no direct correlation between the withdrawals and deposits in the assessee's bank account, emphasizing that the deposits were substantial while the withdrawals were minimal. The AO had noted a time gap between withdrawals and deposits, leading to the addition. The CIT(A) considered the submissions and details of cash withdrawals and deposits, arriving at a figure of Rs.12,28,000 withdrawn from the bank account. The CIT(A) allowed relief for household expenses and upheld the deduction for the balance amount, disagreeing with the AO's addition under section 68.Issue 2: Rejection of claim under section 80C for lack of evidence of investments:The AO rejected the assessee's claim of Rs.1,00,000 under section 80C due to non-production of evidence of investments. However, the CIT(A) observed that the assessee, a government employee, had eligible investments as per Form No-16 and allowed the deduction. The revenue challenged this decision before the Tribunal, arguing that the deposits were unexplained as they occurred after a considerable period from the withdrawals. The assessee, in response, highlighted the sequence of withdrawals and deposits in the bank account, asserting that the AO failed to prove the money was used elsewhere and contended that section 68 should not apply due to the absence of maintained books of accounts.In the final judgment, the Tribunal considered the submissions of both parties and reviewed the withdrawal and deposit patterns in the bank account. Despite time gaps between withdrawals and deposits, the Tribunal concluded that the deposited amounts were not unexplained. The Tribunal agreed with the CIT(A)'s decision, emphasizing that the AO did not provide evidence that the withdrawn funds were utilized elsewhere. Additionally, the deduction allowed under section 80C was upheld based on the Form No-16 issued by the employer. Therefore, the Tribunal dismissed the revenue's appeal, finding no flaws in the CIT(A)'s order.