2020 (1) TMI 289 - AT - Income Tax

Tribunal confirms income addition, emphasizes ownership's tax impact.

The appeal was partly allowed, confirming the addition of Rs. 4,13,747 and deleting the balance. The Tribunal upheld the addition of cash deposits in the ... Addition on account of cash deposits - HELD THAT:- Income is being considered the cash deposits in the hand of the assessee which would not be influenced to the findings in the complaint filed by the assessee against Shri Kalpesh P. Prajapati. We find that the AO has made addition of total cash deposits, however in such cases of cash deposits, only peak balance is being considered. The perusal of statement shows that there is a peak credit balance of ₹ 2,13,747/- as on 24-07-2007. Accordingly, addition to this peak balance is confirmed. We find that there is opening cash deposit of ₹ 2,13,747/- on 04-04-2007, hence the initial cash deposit is also not unexplained. Therefore, the addition of said amount is also confirmed. In view of this, the addition of ₹ 4,13,747/-(4,00,000 + 2,13,747) is confirmed and the balance is deleted. This addition is being confirmed on technical ground as there is a dispute between the assessee and Kalpesh P. Prajapati that the bank account was opened by Shri Kalpesh P. Prajapati and not by the assessee. Further, since the Kalpesh Prajapati has agreed to pay the Income Tax liability before the Hon’ble High Court, therefore as per our considered opinion that the assessee will recover the income tax liability of this income from Shri Kalpesh Prajapati and pay to the Income Tax Department. In view of this fact, the ground of appeal is partly allowed in favour of the assessee. Issues:1. Addition of cash deposits in the bank account.Analysis:Issue 1: Addition of cash deposits in the bank accountThe appeal was filed against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2008-09, challenging the addition of Rs. 13,08,050 made on account of cash deposits in the bank account. The Assessing Officer (AO) noted the cash deposits and the explanation provided by the assessee that the account was opened by another person, Shri Kalpesh P. Prajapati, without the assessee's knowledge. The bank confirmed the account opening details with the assessee's photograph and signature. The AO added the cash deposit to the assessee's income due to the account being in the assessee's name. The CIT(A) upheld the addition based on the mutual agreement between the assessee and Kalpesh, indicating the assessee's involvement. The Tribunal observed that while Kalpesh accepted liability, the account was in the assessee's name. The Tribunal confirmed the addition based on the technicality that the account was in the assessee's name, considering only the peak balance of Rs. 2,13,747 as on a specific date. The initial deposit and subsequent balance were confirmed, with the Tribunal directing the assessee to recover the income tax liability from Kalpesh. The appeal was partly allowed, confirming the addition of Rs. 4,13,747 and deleting the balance.This judgment highlights the importance of account ownership in determining income tax liabilities, even in cases of disputed ownership or misuse. The Tribunal's decision to confirm the addition based on technical grounds and the mutual agreement between the parties showcases the complexities involved in such cases. The direction to recover the tax liability from the responsible party demonstrates the Tribunal's effort to ensure accountability and fairness in tax assessments.