2017 (4) TMI 467 - AT - Income Tax

Tribunal reverses Income Tax additions, finds appellant's explanations satisfactory. Order recalled in interest of justice.

The Tribunal allowed the appeals, reversing the additions made by the AO under the IT Act. The appellant's explanations regarding the cash credit account, ... Treatment to cash credit A/c with Commercial Co-operative bank Ltd. - belonging to Mr. H.K. Mistry (Individual) OR H.K. Mistry(HUF) - Held that:- We have gone through the impugned order, paper book under rule 18(6) and heard rival submission. In support of the contention an affidavit was also filed by the H.K. Mistry (HUF) and he further stated that before the prefix “M/s.” was never attached to the account. In is only in case of HUF or Firm such profit is attached to the account. In the bank the Karta had given his PAN Number to open the account as the HUF had no Permanent Account Number at that time. At the time of opening of HUF account appellant obtained cash credit facility in the name of M/s. H.K. Mistry and copy of certificate from bank dtd. 30/06/2014 sanctioning cash credit loan Account No. 118 belonging M/s. H.K. Mistry has stated by the Bank. So far as Ground related to total cash of ₹ 1,85,800/- is concerned. It was submitted by the learned AR. Assessee had explained the source of nature of credit entries/deposits made in the bank account. It was submitted that the amounts were received by way of cheques and cash from Darshan Traders, Prop. Alka Mistry. Further stated that the cheques and cash amounts received from Darshan Traders in the Assessment Year 2010-11 have been partly accepted as genuine amounts. Therefore there was no reason for the authorities below. Darshan Traders ought to have been accepted by the genuine source of deposit in this A.Y. - Decided in favour of assessee Issues involved:1. Consolidation of appeals and adjournment requests.2. Treatment of cash credit account as belonging to an individual or HUF.3. Treatment of cash deposits in the bank account as unaccounted investment.4. Addition of interest income from an undisclosed bank account.5. Disallowance of claimed expenses and addition to total income.Issue 1: Consolidation of appeals and adjournment requestsThe appellant filed appeals for the Assessment Years 2006-07 and 2007-08 and requested consolidation with another appeal for the year 2010-11. Despite adjournment requests, the appeals were dismissed in limine. The Tribunal recalled the order in the interest of justice and allowed the appellant's applications.Issue 2: Treatment of cash credit accountThe Income Tax Department raised concerns about cash deposits in the appellant's account, suspecting unaccounted funds. The appellant claimed the account belonged to their HUF, supported by an affidavit. However, the AO considered the amount unexplained, leading to an addition to the appellant's income under section 69 of the IT Act.Issue 3: Treatment of cash deposits as unaccounted investmentDuring assessment proceedings, it was discovered that the appellant had made significant cash deposits in a bank account. The appellant explained the deposits were from their HUF, but due to lack of PAN and income sources for the HUF, the AO treated a portion of the deposits as unexplained investments under section 69 of the IT Act.Issue 4: Addition of interest incomeFurther investigation revealed interest income earned by the appellant from an undisclosed bank account. The AO added this interest amount to the appellant's total income.Issue 5: Disallowance of claimed expensesThe appellant's claimed expenses, including purchases, were not substantiated with evidence. As a result, a portion of the expenses was added to the total income by the AO. The CIT(A) partly allowed the appeal, but the Tribunal considered the appellant's submissions regarding the cash credit account and the nature of deposits, ultimately allowing both appeals.In conclusion, the Tribunal allowed the appeals, considering the explanations provided by the appellant regarding the cash credit account, cash deposits, and claimed expenses, leading to the reversal of additions made by the AO under the IT Act.