Addition deleted for deposits of fee by students of employer school in assessee’s bank

Addition deleted for deposits in assessee’s bank account, fees of students of the school the assessee was employed.

In a recent judgment, Allahabad ITAT deleted the addition made to the income of the assessee towards deposits in his personal bank account, fees of the students of his employer school.

ABCAUS Case Law Citation:
4731 (2025) (09) abcaus.in ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming addition made by the AO for deposits in his bank account.

The appellant assessee is an employee of a School.  During the assessment proceedings the Assessing Officer asked the assessee to furnish explanation regarding cash deposit in his bank accounts.

The assessee explained that the amount deposited in aforesaid two bank accounts was out of fees collected from students by the school he was working in.  The However, the Assessing Officer (AO) disbelieved the assessee’s explanation and made the addition of the cash deposited to his income and completed assessment u/s 147/143(3) of the Act.

Aggrieved, the assessee filed appeal in the office of the CIT(A).  During appellate proceedings, the assessee reiterated the submissions that the cash deposit was towards the fees collected from the students for school education.  He further submitted that the Manager of the school was produced before the Assessing Officer, who confirmed that the assessee had used his bank account for depositing fees collected from the students of the school. 

The assessee also submitted that the bank account in question was used for personal purposes of his own and his family.  He submitted that the assessee’s wife had agricultural income, which was also deposited in the bank account.  The assessee furnished affidavit of his wife to the effect that her agricultural income and sale proceeds of land in cash were also deposited in the bank. 

However, the CIT(A) applied peak credit theory and confirmed the addition.

The Tribunal observed that the assessee had produced the Manager of the school in support of the claim that the aforesaid bank accounts were used for depositing cash received from the students of the school. 

It was further observed by the assessee that the assessee had submitted the affidavit of his wife to the effect that the bank account was used for depositing her agricultural income and sale proceeds of agricultural land in cash. 

The Tribunal noted that the Assessing Officer and the CIT(A) disbelieved the explanation furnished by the assessee merely on the basis of suspicion, doubt and conjecture despite evidence placed on record by the assessee in support of the explanation. 

The Tribunal held that in the specific facts and circumstances of the case, the explanation furnished by the assessee was acceptable.  Therefore, the Tribunal set aside the impugned order of CIT(A) and directed the Assessing Officer to delete the entire addition which was confirmed by CIT(A).

In the result, the appeal of the assessee was allowed.

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