Case Law Details
ITO Vs Aaditra Foundations (ITAT Chennai)
The case of ITO vs. Aaditra Foundations, as adjudicated by the Income Tax Appellate Tribunal (ITAT) in Chennai, revolves around the taxation of funds transferred from a current account to a deposit account and the subsequent interest earned on those deposits. Here’s a detailed summary:
The appeal by the Revenue for the Assessment Year (AY) 2018-19 stemmed from an order passed by the Commissioner of Income Tax (Appeals) [CIT(A)] in Delhi, dated 28-07-2023. The Revenue contested several grounds, including the non-response to notices by the assessee, the closure of business operations by the assessee, and the source of credits in the assessee’s account.
During the appellate proceedings, it was revealed that the assessee, a resident firm engaged in real estate and civil work, had closed its operations and surrendered its PAN in November 2017 due to sluggishness in the construction business. The Assessing Officer (AO) added a deposit of Rs. 207.06 Lacs to the assessee’s income, along with interest income of Rs. 2.62 Lacs from other sources, as the firm did not file its return of income.
The assessee argued that the funds transferred to the deposit account were primarily sweep credits, wherein surplus funds from the current account were automatically transferred to the deposit account and vice versa. Additionally, a portion of the credit was from a partner’s capital contribution. The CIT(A) accepted the explanation provided by the assessee and deleted the addition of Rs. 207.06 Lacs.
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