2016 (4) TMI 1415 - AT - Income Tax

ITAT Kolkata affirms CIT(A)'s decisions on undisclosed income additions under Income Tax Act

ITO Ward-1 (4) Versus Sri Sukamal Sikdar Amlagora

The ITAT Kolkata upheld the CIT(A)'s decisions in a case involving additions made by the AO under Section 69A of the Income Tax Act. The first issue ... Addition u/s 69A - undisclosed credit balance of DDs - DDs purchased from disclosed CC A/c, but not reflected in financial statement or bank A/c though these DDs were in the hands of the assessee - whether DDs made by the assessee from his CC account amounts to unexplained money? - CIT-A deleted the addition - HELD THAT:- These DDs were made from the disclosed bank account of the assessee and were transferred to his saving bank account. It is also nowhere mentioned that this account of the assessee wasn’t disclosed in the return of income. We also observe from the finding of the AO that these DDs were made out of the CC account of the assessee. As per the provisions of Section 69A of the Act unexplained money can be brought to tax if it is not recorded in the books of accounts and assessee offers no explanation about the nature and source of acquisition of money. In the present case, the sources of the DDs have not been doubted. Accordingly, in our considered view that there is no infirmity in the order of the Ld CIT(A) and we uphold the same. Hence this ground of appeal of Revenue is dismissed. Undisclosed money in credit - HELD THAT:- We find that the sourc has not been doubted as it was withdrawn from the bank so the transaction of making the payment of ₹ 7.13 lakhs is out of the purview of Section 69A of the Act. As per the provisions of Section 69A of the Act unexplained money can be brought to tax if it is not recorded in the books of accounts and assessee offers no explanation about the nature and source of acquisition of money. In this case the source of the payment has not been doubted. Accordingly, in our considered view that there is no infirmity in the order of the Ld CIT(A) and we uphold the same. Hence this ground of appeal of Revenue is dismissed. Issues involved:1. Addition of Rs. 40 lakhs as undisclosed credit balance of DDs.2. Addition of Rs. 7.13 lakhs on account of undisclosed money.Issue 1: Addition of Rs. 40 lakhs as undisclosed credit balance of DDsThe first issue revolves around the deletion of the addition made by the Assessing Officer (AO) of Rs. 40 lakhs as the assessee failed to declare the same in the financial statements despite having Demand Drafts (DDs) in hand. The AO treated the amount as undisclosed credit balance under Section 69A of the Income Tax Act. However, the Commissioner of Income Tax (Appeals) (CIT(A)) deleted the addition, noting that the DDs were purchased from the disclosed CC account and were duly reflected in the financial statements. The CIT(A) found the addition by the AO to be ill-conceived and directed its deletion. The ITAT Kolkata upheld the CIT(A)'s decision, emphasizing that the DDs were made from the disclosed bank account, and the source of the funds was duly recorded in the books of account. The tribunal concluded that there was no infirmity in the CIT(A)'s order and dismissed the Revenue's appeal.Issue 2: Addition of Rs. 7.13 lakhs on account of undisclosed moneyThe second issue concerns the addition made by the AO of Rs. 7.13 lakhs as undisclosed money, which was refunded to Potato Suppliers by the assessee. The AO held this amount as unexplained money under Section 69A of the Act due to insufficient documentary evidence provided by the assessee. However, the CIT(A) deleted this addition, highlighting that the withdrawals made from a bank account where deposits were explained cannot be termed as unexplained money. The CIT(A) found the AO's addition to be ill-conceived and bad in law, leading to the deletion of the Rs. 7.13 lakhs addition. The ITAT Kolkata upheld the CIT(A)'s decision, stating that since the source of the amount was not doubted and it was withdrawn from the bank, the transaction was outside the purview of Section 69A. The tribunal found no infirmity in the CIT(A)'s order and dismissed the Revenue's appeal.In conclusion, the ITAT Kolkata, in the cited judgment, analyzed and resolved the issues related to the additions made by the AO under Section 69A of the Income Tax Act. The tribunal upheld the decisions of the CIT(A) in both instances, emphasizing the importance of disclosing transactions and sources of funds in the books of account to avoid being treated as undisclosed or unexplained money.