The Pune Branch of Income Tax Appellate Tribunal (ITAT) deleted the addition made by the Assessing Officer of ₹3,00,000 on the opinion that Children Providing Financial Support to Parents out of Moral Responsibility is Common Practice.
The assessee Shergil Harjit, an individual filed return of income for A.Y. 2015-16 declared total income of Rs.4,52,490. The assessment was completed under section 143(3) of Income Tax Act, 1961.
During the course of assessment proceedings, Assessing Officer(AO) found that the assessee is engaged in the business of Readymade Garments and also had derived income from bank interest.The assessee had shown business income of Rs.3,05,400 and interest income of Rs.1,57,086.
Further the assessee had also deposited cash in bank of Rs.15,68,000 as against the gross turnover of business of Rs.7,88,900.
The AO made an addition of Rs.3,00,000/- and added to the total income of the assessee for which supporting evidence was not filed by the assessee.
Principal of Commissioner of Income Tax (PCIT) held that the assessment was erroneous so as to be prejudicial to the interests of the Revenue.
The PCIT further opined that the addition in the assessment order of Rs.3,00,000 was charged to tax at normal rate which was actually an unexplained cash deposit which was required to be taxed under section 69 of Income Tax Act as unexplained investment in view of the insertion of section 115BBE(1) by the Finance Act, 2012 w.e.f. 01.04.2013, any income referred to in section 68, 69, 69A, 69B, 69C & 69D was required to be taxed at the rate of 30% (flat rate) and no other deduction is allowed to the assessee against such income.
Whereas, in this case, the Assessing Officer has levied the tax on the addition made on account of unexplained cash at normal rate instead of rate specified in section 115BBE(1) of the Income Tax Act.
The assessee in the scrutiny assessment explained before the AO that the gross business turnover was Rs.7,88,900 during the F.Y. 2014-15 whereas the cash deposit in bank was Rs.15,68,000 and the difference of Rs.7,79,100 has also been explained in the letter.
The panel Inturi Rama Rao (Accountant Member) and Partha Sarathi Chaudhury (Judicial Member) noted that the assessee and her spouse are both extremely elderly people from respectable social and economic backgrounds. It has been expressly reported that due to their advanced age and health issues, they have cash on hand to cover any sudden medical needs.
Further the bench highlighted that it is a part of moral responsibility on the part of the children for taking care of their aged parents at least by sending finances irrespective of whether they require it or not.
The Bench held that the order of PCIT under section 263 of Income Tax Act is unjustified, invalid and quashed the same.
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