Cash Deposits In Education Trust Account Not Taxable In Individual's Hands: ITAT New Delhi

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT), on 30 April, held that cash deposits in a bank account of a separate legal entity cannot be taxed in an individual's hands merely because he is an authorised signatory, unless there is evidence establishing beneficial ownership or undisclosed income.

A Bench comprising Judicial Member Raj Kumar Chauhan and Accountant Member Brajesh Kumar Singh dismissed the Revenue's appeal and upheld the CIT(A)'s order deleting an addition of Rs. 4,94,69,000 made under Section 68 of the Income Tax Act. It observed:

“the fact remains that the bank account in which the cash deposit has been made, and which is the basis for making addition in the case of the assessee does not belongs to the assessee. Further, no collaborative evidence has been brought on record by the AO to show that it represents the undisclosed income of the assessee.”

Deepak Gupta, an individual taxpayer, declared income of Rs. 6.50 lakh. Authorities flagged his case through a Suspicious Transaction Report due to large cash deposits during the demonetisation period. The Assessing Officer found cash deposits of Rs. 4.94 crore in a bank account linked to his PAN and treated them as unexplained income under Section 68 of the Income Tax Act.

On appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] held that the bank account belonged to Deepak Gupta Education Trust, a separately assessed charitable entity. It found that Gupta acted only as an authorised signatory and had no ownership or beneficial interest in the funds. It also recorded that the trust had reflected the deposits in its books and the tax department had already assessed them in the trust's hands.

Before the Tribunal, the Revenue argued that PAN linkage and control over the account justified the addition and that the taxpayer failed to discharge the burden under Section 68.

However, the Tribunal rejected this argument. The Bench held that authorisation or operational control alone does not prove ownership of money. It found that the bank account did not belong to the taxpayer and that the Revenue failed to produce any evidence linking the deposits to his undisclosed income. It clarified that its decision applied only to the taxpayer's case and would not affect assessment proceedings in the hands of the trust.

Accordingly, the ITAT dismissed the Revenue's appeal.