No addition for Deposits in bank made from past savings

Shiv Nath Vs ITO (ITAT Chandigarh)

Conclusion: In present facts of the case, the Income Tax Appellate Tribunal deleted the addition of Rs. 3,31,000/- by the AO, while considering the fact that the family members of the assessee were earning (but were below taxable limits), and the deposits made were from the past savings and earnings of the entire family which were pooled together.

Facts: In present facts, the proceedings u/s 147 of the Income Tax Act, 1961 were initiated in the case of the assessee in view of the fact that certain deposits were found to have been made in the assessee’s bank account. To which the assessee filed a return declaring total income of Rs.76,600/-. The AO considering the reply as unsatisfactory made the addition of Rs. 3,31,000/-. The assessee appealed to the First Appellate Authority, but was rejected.

Before the Hon’ble ITAT, it was submitted by the assessee that the deposits were from the past savings and earnings of the entire family. These had been pooled together but the explanation had not been considered. The availability of funds with the assessee was necessitated for sending his child to Australia for further studies It was submitted that since the earnings of the assessee or his family members was limited and did not require the filing of tax returns, hence he was not in a position to file any such document. The earnings of the family members were much below the taxable limits.

The Hon’ble ITAT observed that a perusal of the record shows that the AO rejected the explanation of the assessee in part for want of documentary evidence. The appeal of the assessee was dismissed by the First Appellate Authority on the grounds of limitation. Further, it was observed that The abrupt dismissal of the appeal ignoring the facts and without affording an opportunity to meet the charge, was considered not to be upheld. The arbitrary order where without giving notice the explanation appended in the Memo of Appeals cannot be upheld. It was further observed that the Arbitrary and unfair actions by the Authorities can have serious consequences wherein the marginalized may consider themselves alienated from the system. Such an outcome should be actively avoided. No advantage has been derived by the assessee by filing the appeal late and no vested right of the Revenue has been upset if the delay in a case like the present case was condoned and accordingly the delay during COVID period was accepted.

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