Case Law Details
Ramesh Rani Chatwal Vs ITO (ITAT Delhi)
Introduction: The Ramesh Rani Chatwal vs ITO case ruled by ITAT Delhi is a significant judgment dealing with additions to income from unexplained investments. In this case, the ITAT upheld the right of an individual to use personal savings, including those from a late spouse, for the repayment of a bank loan, and dismissed the claim that such actions constitute unexplained investment.
Analysis: Ramesh Rani Chatwal, an elderly woman, was subjected to an adhoc addition of Rs. 1188000 by the AO and the CIT (A) to her income as unexplained investment, following her deposit of this amount into her bank account. The cash deposit was made to cover her loan repayment and associated interest charges.
The AO issued a notice asking Chatwal to explain the source of the cash deposit, and due to the lack of response, added the entire amount to her assessable income. After losing her appeal at the CIT (A), Chatwal approached the ITAT.
Chatwal argued that the money was the result of her and her late husband’s lifelong savings, and was being used to avoid late payment charges on her loan. She cited the case of Leela Devi VS ITO where the court recognized a housewife’s contribution to a family’s savings and allowed her to deposit saved cash without it being taxed.
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