Income Tax on sum received from Mother-in-Law by way Settlement of case in Court: ITAT directs Fresh Adjudication on ground of failing to make enquiry of correctness of claim [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal (ITAT)  directed fresh adjudication on grounds of failing to make enquiry on the correctness of claim of sum received from mother -in-law by way of settlement of case in court.

The assessee, Pawanveer Singh engaged in a small business of kirana merchants and regularly filed his return of income.

During the Financial Year 2011-12, the assessee had deposited a sum of INR 13,90,000/- in cash in his bank account. Due to this reason assessee case was reopened.

During the proceedings, the assessee was required to explain the source of cash deposits amounting to INR 13,90,000/- made in his bank account. In response the assessee submitted the sum of INR 12,00,000/- out of the amount received from his mother-in-law.

Thereafter after the submission of the assessee, AO contended that the amount was unexplained due to failure to establish the creditworthiness of the transaction by assessee.

Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax Appeal [CIT(A)], who dismissed the appeal filed by the assessee. Thus, the assessee filed a second appeal before the tribunal.

When the appeal was considered before the bench K.M.Gupta, the counsel for assessee submitted that assessee had received the amount from  her mother-in-law and  which was the amount  received   by her mother in law  by way of settlement of case in the Court.

Om Parkash for the Revenue opposed these submissions and supported the orders of the authorities below.

After reviewing the facts and submission, the two member bench of the tribunal comprising Dr. B.R.R.Kumar (Accountant Member) and Kul Bharat (Judicial Member) observed that the authorities below made addition on the ground that the assessee failed to explain the source of credit made in the bank account.

However, the authority below did not make any further enquiry to verify the correctness of claim of the assessee.

Therefore, the bench restore the assessment to the file of AO for making assessment afresh and directed  the AO to verify the correctness of the claim of the assessee that the sum of INR 12,00,000/- was received from his mother-in-law and frame the assessment after providing adequate opportunity to the assessee. 

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