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March 22, 2023

Funds put in the account of the Assesee has already been taxed by his employer; there has been no addition to the Employee’s account

Funds put in the account of the Assesee has already been taxed by his employer; there has been no addition to the Employee’s account

Fact and issue of the case

Brief facts as noted by the AO are that the assessee is an individual who has derived income from salary, and income from other sources. The AO notes that the assessee had filed return of income on 25.05.2011 declaring total income of Rs.2,85,630/- and the return was processed u/s 143(1) of the Act. Later, the assessment of the assessee was reopened on the basis of information received from the DDIT(Inv.), Mumbai from which it transpired (the adverse information verbatim has been reproduced for easy reference) “the assessee, was a manager in M/s. Kareem’s Hospitality Pvt. Ltd. and Mr. Kareem Dhanani was the Director of the same. Mr. Kareem Dhanani gave his brand “Kareem” on commission to different franchises and collected commission by way of cash and deposited the same into assessee, i.e. Mr Vikas Sharma’s Bank Account.” Based on the aforesaid information, the AO summoned the assessee (Vikas Sharma) and asked him to explain the source of cash deposits in his bank accounts and the evidence of the same. The AO notes that the assessee had attended the office and his statement was recorded u/s 131 of the Act on 30.03.2015 wherein he has admitted that the money in the three (3) bank accounts which were credited where that of the M/s. Kareem’s Hospitality Pvt. Ltd. The AO took note of the following cash deposits which were found to have been made in the accounts of the assessee are as under: –

Sr no.Name of the bank and A/c. No.AmountF.Y.
1ICICI Bank Saving A/c. No. 10901501136Rs. 18,44,255/-2009-10  
2The Saraswat Co-op Bank A/c. No. 197200100000301Rs. 7,65,900/-2009-10
3The Saraswat Co-op Bank A/c. No. 197200100000355Rs. 10,59,140/-2009-10
4TotalRs. 36,69,295/- 

According to the AO, even though he had issued notice u/s 133(6) of the Act to M/s. Kareem’s Hospitality Pvt. Ltd. asking information as to whether the aforementioned cash deposited in the assessee’s bank accounts was reflected in its income, the same elicited no reply. Therefore, the AO concluded that the assessee could not prove the “nature and source” of the cash deposited in his bank accounts. Therefore, he was pleased to make the addition of Rs.36,69,295/- u/s 68 of the Act dated 07.12.2016.

ITA. No. 49/Mum/2022 (for AY. 2011-12)

18. Brief facts is that the AO has framed re-assessment on 07.12.2016 by making an addition of Rs.2,89,850/- u/s 68 of the Act based on the fact that the assessee had bank deposit at HDFC Saving Account no. 04901930003090 of an amount of Rs.2,89,850/- which the assessee failed to explain, therefore, he made an addition of Rs.2,89,850/-.

Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who on similar reasons stated (supra) have sustained the addition. Aggrieved, the assessee is before us.

Observation of the court

We have heard both the parties and perused the records. In respect of this assessment year (AY. 2011-12), the Ld. AR drew our attention to the assessment order passed by the AO dated 22.12.2016 in the case of M/s. Kareem’s Hospitality Pvt. Ltd wherein the AO was pleased to add Rs.14,71,400/- which included Rs.2,89,850/- in HDFC Bank account no.04901930003090. The AO has also noted in that order that the director of assessee company Shri Kareem Dhanani had deposited the cash in the personal account of his manager Mr. Vikas Sharma maintained with HDFC and Saraswat Bank. And thereafter has made an addition of Rs.11,71,400/- which included the amount of Rs.2,89,850/- which was in the name of the assessee (Mr. Vikas Sharma) opened in HDFC Bank account no. 04901930003090. Thus, it was demonstrated before us that the addition of Rs.2,89,850/- which was made in the assessee’s hand, have been again taxed in the hands of M/s. Kareem’s Hospitality Pvt. Ltd. In such a scenario, we are inclined to set aside the impugned order of the Ld. CIT(A) remand the same back to the file of the AO with a direction to verify the facts narrated (supra) and if the cash deposited in assessee’s bank account in HDFC Bank to the tune of Rs.2,89,850/- has already been taxed in the hands of M/s. Kareem’s Hospitality Pvt. Ltd as observed by us (supra) then there is no necessity of make an addition in the hands of the assessee who was only a manager of M/s. Kareem’s Hospitality Pvt. Ltd. With this observation, this appeal of the assessee is also allowed for statistical purposes.

ITA. No.51/Mum/2022 (For AY. 2011-12)

This is an appeal preferred by the assessee against the penalty levied u/s 271(1)(c) of the Act by the AO which has been confirmed by the Ld. CIT(A) for AY.2011-12. Since we have set aside the quantum assessment back to the file of the AO, the penalty stands cancelled and the AO is at liberty to initiate the same after framing the assessment order in accordance to law.

In the result, all the appeals of the assessee are allowed for statistical purposes.

Order pronounced in the open court on this 26/07/2022.


In the result, appeal of the assessee is allowed and ruled in favour of the assessee

Read the full order from here


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