Tribunal rules on cash deposits & HRA claim in favor of husband's business

Income Tax Officer Ward 12 (5), Hyderabad Versus Smt. Guthula Nagamany And Vice-Versa

Income Tax Officer Ward 12 (5), Hyderabad Versus Smt. Guthula Nagamany And Vice-Versa - TMI Issues:
1. Whether cash deposits in the bank account belong to the assessee or her husband.
2. Disallowance of House Rent Allowance (HRA).

Analysis:

Issue 1:
The main issue in this case was determining whether cash deposits in the bank account belonged to the assessee or her husband. The AO identified a significant cash deposit in the assessee's bank account and questioned the source of these funds. The assessee explained that the deposits were related to her husband's rice trading business, providing evidence to support this claim. The AO, however, added the entire deposits as income from unexplained sources in the hands of the assessee. The CIT (A) observed that the husband had declared that the cash deposits belonged to him and directed the AO to verify the sources in the husband's assessment. The Tribunal noted that the husband's declaration and the nature of transactions indicated that the deposits were related to his rice business. As the wife was a joint account holder, deposits made by the husband from his separate business could not be added to the wife's income. Therefore, the Tribunal upheld the CIT (A)'s decision and dismissed the Revenue's appeal.

Issue 2:
Regarding the disallowance of House Rent Allowance (HRA), the AO initially disallowed a specific amount claimed by the assessee's husband under section 80GG. However, during the appellate proceedings, the assessee submitted that her husband had revised his return to withdraw the claim under section 80GG. The CIT (A) directed the AO to verify the genuineness of the claim and allow the HRA deduction after verifying the facts. The Tribunal agreed with the CIT (A)'s decision, stating that the party who paid the rent could claim the deduction, and it was the AO's responsibility to verify the facts to determine the eligibility for the HRA claim. Therefore, the Tribunal rejected the assessee's cross objection on this issue.

In conclusion, both the Revenue's appeal and the assessee's Cross Objection were dismissed by the Tribunal, upholding the decisions of the CIT (A) on both issues.