Case Law Details
Rakesh Reddy Keshanna Vs ITO (ITAT Hyderabad)
In a noteworthy judgment dated December 26, 2023, the Income Tax Appellate Tribunal (ITAT) Hyderabad bench addressed a significant concern related to the assessment of cash deposits made outside the relevant assessment year. The case, Rakesh Reddy Keshanna Vs Income Tax Officer (ITO), centered around the addition of Rs. 20 lakhs to the income of the assessee by the Assessing Officer due to deposits made during the demonetization period and shortly thereafter.
Background of the Case
The appellant, Rakesh Reddy Keshanna, faced scrutiny for deposits totaling Rs. 20 lakhs in his bank accounts, prompting the Assessing Officer to seek explanations for the source of these funds. The assessee’s inability to furnish satisfactory explanations led to the entire sum being added to his income for the assessment year 2017-18. Challenging this decision, the assessee appealed to the Commissioner of Income Tax (Appeals) – National Faceless Appeal Centre (NFAC), Delhi, which upheld the Assessing Officer’s action for lack of convincing evidence.
Tribunal’s Analysis and Ruling
The ITAT’s examination revealed a critical oversight by the lower authorities. The assessee had deposited Rs. 5 lakhs on August 7, 2017, which fell outside the previous year relevant for the assessment year 2017-18. This crucial detail was missed in the assessment, leading to an incorrect inclusion of this amount in the assessee’s income for the said assessment year.
Acknowledging this error, the ITAT ordered the deletion of the Rs. 5 lakhs from the assessee’s income, citing that it could not be considered for assessment for the year in question. This ruling highlights the importance of precise assessment periods and the need for tax authorities to meticulously evaluate the timing of income and deposits.
Further Deliberations
Regarding the remaining Rs. 15 lakhs, the tribunal noted that the Assessing Officer had overlooked submissions and evidence provided by the assessee, particularly concerning the Rs. 5 lakhs gifted by the assessee’s father. Supported by confirmation letters, affidavits, and land revenue records, this amount was accepted as a genuine gift, leading to the directive for its deletion from the added income.
For the balance Rs. 10 lakhs claimed to be gifts from the assessee’s grandfathers, the ITAT recognized the need for further verification. Accordingly, the matter was remanded back to the Assessing Officer for a detailed examination of the affidavits and other supporting materials presented by the assessee.
Implications of the Judgment
This judgment by the ITAT Hyderabad underscores the criticality of adhering to the assessment year’s relevance when evaluating income and deposits for tax purposes. It serves as a reminder to both taxpayers and tax authorities about the significance of documenting and substantiating the sources of income, especially in cases involving cash deposits during sensitive periods like demonetization.
Moreover, the tribunal’s decision emphasizes the need for a thorough and considerate examination of evidence submitted by taxpayers. It also highlights the judiciary’s role in ensuring fairness and justice in the tax assessment process, rectifying oversights that could lead to undue tax liabilities for individuals.
Conclusion
The ITAT Hyderabad’s ruling in the case of Rakesh Reddy Keshanna Vs ITO is a landmark decision that brings clarity to the assessment of cash deposits made outside the relevant assessment year. By meticulously analyzing the facts and evidence, the tribunal has reinforced the principles of equity and due process in tax assessments, ensuring that taxpayers are not unjustly penalized for deposits that do not pertain to the assessment year in question. This judgment is poised to influence future cases involving similar disputes, guiding both tax practitioners and authorities in their respective roles.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
Aggrieved by the order dated 12/10/2023 passed by the learned Commissioner of Income Tax (Appeals)- National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”), in the case of Rakesh Reddy Keshanna (“the assessee”) for the assessment year 2017-18, assessee preferred this appeal.
2. Brief facts of the case are that looking at the deposits made by the assessee in the bank accounts to the tune of Rs. 20 lakhs during the demonetization period, the learned Assessing Officer sought the assessee to explain the source of deposits, but observing that the assessee could not furnish any information as to his business activities and the source of deposits, added the entire Rs. 20 lakhs to the income of the assessee.
3. Aggrieved, assessee preferred appeal before the learned CIT(A), and pleaded that the deposit of Rs. 20 lakhs represent Rs. 15 lakhs deposited on 24/11/2016 with HDFC Bank, Patamata Branch, Hyderabad and Rs. 5 lakhs deposited on 07/08/2017 with ICICI Bank, S.D. Road, Secunderabad. Assessee accordingly submitted that the deposit of Rs. 5 lakhs on 07/08/2017 cannot be considered for assessment of income for the assessment year 2017-18 and the same has to be deleted. In respect of the balance of Rs. 15 lakhs, he submitted that Rs. 5 lakhs each was given to him by his father and grand fathers (both paternal and maternal).
4. Learned CIT(A) did not accept the contentions of the assessee on the ground that no supporting and convincing evidence is produced by the assessee in support of his contentions.
5. It is submitted on behalf of the assessee that to the notice issued under section 133(6) of the Act, the assessee furnished all the relevant record to support the identity and creditworthiness of the donors and also the genuineness of the transaction in view of the close relationship. According to him, the learned Assessing Officer did not mention the date of deposit of Rs. 5 lakhs which is beyond the assessment year in question and no finding is given as to why the gift the father is not accepted.
6. Per contra, learned DR submitted that the assessee did not produce any evidence whatsoever in support of his contentions or to prove the gifts. He submitted that in the absence of any evidence, the authorities are justified in making/upholding the addition.
7. I have gone through the record in the light of the submissions made on either side. In the submissions before the learned CIT(A), the assessee specifically stated that out of Rs. 20 lakhs, a sum of Rs. 5 lakhs was deposited on 07/08/2017 with ICICI Bank and such a deposit cannot be said to have been made during the previous year relevant for the assessment year 2017-18. This aspect missed the attention of both the authorities. Hence, the addition of Rs. 5 lakhs on that count has to be deleted.
8. Now, coming to the balance Rs. 15 lakhs to the notice issued under section 133(6) of the Act, the father of the assessee by name Shri Narayana Reddy filed the confirmation leers supported by land revenue record etc., which are not considered by the learned Assessing Officer. Insofar as the father of the assessee is concerned, he is alive and filed the confirmation leer and affidavits with supporting evidence as to the agricultural income. There is no reason not to believe the same. Hence, I accept the gift Rs. 5 lakhs given by the father of the assessee and learned Assessing Officer is directed to delete the addition to the extent of such Rs. 5 lakhs also.
9. In respect of the balance Rs. 10 lakhs, said to have been donated by the grandfathers, both paternal and maternal, and given by their sons, I agree with the learned AR that the affidavits and other material require further verification at the end of the learned Assessing Officer. Accordingly, the maternal is restored to the file of learned Assessing Officer for fresh verification of the material produced by the assessee in respect of the gift of Rs. 5 lakhs each by the grandfathers. Grounds of appeal are treated as allowed in part for statistical purposes.
10. In the result, appeal of the assessee is treated as partly allowed for statistical purposes.
Order pronounced in the open court on this the 26th day of December, 2023.
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