ITAT remanded matter to AO for de novo consideration on issue of salary income

1. The assessee was an individual who was engaged in the business of sale of pump sets on commission basis. He filed his return of income for the relevant assessment year 2009-2010 declaring the taxable income of Rs.1,99,492. During the assessment proceedings u/s 143(3) (of Income Tax Act, 1961), the assessee was asked to produce the books of account, cash flow statements, credit/debit receipts and source of income. But the assessee did not appear nor did he produce any information as called for and therefore, the A.O. completed the assessment under section 144 (of Income Tax Act, 1961) by making various additions. The assessee was an employee of M/s. Varun Sales Corporation and was in receipt of salary of Rs.1,44,000 during the year under consideration and from the bank account of the assessee maintained with the ICICI Bank, the A.O. observed that there were deposits in regular monthly fashion at Rs.28,250 for the first two months and Rs.31,625 for the next ten months and therefore, the A.O. has treated the total of these deposits i.e., Rs.3,72,950 as salary income of the assessee and after reducing the declared salary income of Rs.1,44,000, the balance of Rs.2,28,950 was brought to tax.

2. CIT(A) partly allowed the additions.

3. On appeal, the ITAT held as under:

" Further, we find that there were cash deposits in the ICICI Bank account also which has not been explained by the assessee nor has it been enquired by the A.O. or the Ld. CIT(A) after giving the assessee an opportunity to explain these credits. Therefore, we deem it fit and proper to remit this issue to the file of the A.O. for reconsideration after giving the assessee a fair opportunity of hearing.

4. As regards the other addition i.e., estimation of profit of Rs.3,53,445 on the basis of the credits in the bank accounts and also of Rs.3,58,133 on account of transaction of credit cards also, we find that the assessee needs to explain the nature of the credits into the bank account and whether they are in the nature of income of the assessee and also the nature of expenditure incurred through credit cards. Therefore, in the interest of justice, these two additions are also set aside to the file of the A.O. for denovo consideration. Needless to mention that assessee shall be given a fair opportunity of hearing.”

Case Reference - Mr. Shankar Reddy vs The Income Tax Officer.

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES "A" : HYDERABAD

BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND

SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER

ITA.No.1153/Hyd/2015

Assessment Year 2009-2010