2019 (5) TMI 1952 - AT - Income Tax

ITAT allows appeal, deletion of unexplained investment, cash deposits part of business turnover

Shri Subhash Chand Sharma Versus Income Tax Officer-2 (2), Agra

The ITAT allowed the appeal, deleting the addition of Rs.33,57,510/- as unexplained investment. The appellant successfully argued that the cash deposits ... Addition on account of the peak cash deposit in his bank account as unexplained investment - assessee derived income from business of dairy products and interest on bank deposits - HELD THAT:- The contention of the AR although deserves to be accepted but in the absence of documentary evidence in support of amount returned to society, the ledger itself filed by assessee cannot be held as sufficient documentary evidence to reach any conclusion. But we find force in the argument raised by assessee that, the assessee is carrying on a small business of dairy products through cash transactions and in absence of any other source of income, the total deposits made in the assessee’s saving bank account can be considered as his business turnover which gets support from the observation of AO for the year under consideration and the AO’s observation in assessment of the preceding year where on identical facts, the trading turnover of “dairy business” of the assessee, cash deposits from cash transactions has been accepted as his business turnover and the profit disclosed in the return was accepted. Cash deposit and withdrawal in the bank account was made regularly by the assessee during the year, it is very reasonable to say that the same was business turnover and therefore only gross profit addition is justified in the facts of the present case. Hence, we are not inclined to agree with the finding of the CIT(A) in observing that of peak cash deposits in bank account, endorsing the observation of the AO which was against the principle of ‘rule of consistency’ on comparison to the preceding Assessment Year and nature of retail milk business of the assessee. In our considered opinion, such deposits in the bank account would certainly constitute business turnover of the assessee and the income disclosed in the return is justified as reasonable business profit for the year under consideration. Assessee appeal allowed. Issues:1. Challenge to the sustaining of the Assessing Officer's Order under section 144 of the Income Tax Act, 1961.2. Addition of Rs.33,57,510/- as unexplained investment based on peak cash deposit in the bank account.3. Legality and factual accuracy of the order passed by the authorities.4. Request for any other relief deemed fit in the circumstances.5. Permission to add, alter, or vary the grounds of appeal.Issue 1: Challenge to the sustaining of the Assessing Officer's Order under section 144:The appellant contested the order of the ld. CIT(A) sustaining the Assessing Officer's Order under section 144 of the Income Tax Act, 1961. The appellant argued that the authorities erred in law and on facts in upholding the said order.Issue 2: Addition of Rs.33,57,510/- as unexplained investment:The core issue revolved around the addition of Rs.33,57,510/- as unexplained investment based on the peak cash deposit in the appellant's bank account. The appellant, engaged in the business of dairy products, explained that the cash deposits in question belonged to a cooperative society and not to him personally. The appellant provided documents to support this claim, including sale deeds and certificates. However, the ld. CIT(A) rejected these documents as they were not presented before the Assessing Officer.Issue 3: Legality and factual accuracy of the order:The appellant challenged the legality and factual accuracy of the order passed by the authorities. The Assessing Officer treated the cash deposits as unexplained, leading to the addition in question. The ld. CIT(A) upheld this decision, stating that the appellant's explanations and documents were insufficient to prove that the cash belonged to the society and not to the appellant.Issue 4: Request for other relief:The appellant sought any other relief deemed fit in the circumstances of the case. The appellant emphasized that the deposits in the bank account were related to the sale proceeds of plots by the society and should be considered as business turnover, not unexplained investments.Issue 5: Permission to add, alter, or vary the grounds of appeal:The appellant requested permission to add, alter, or vary the grounds of appeal before or at the time of the hearing, indicating a willingness to provide further details or arguments as necessary.In the detailed analysis, the appellant's arguments centered on establishing that the cash deposits in the bank account were not personal investments but rather part of the business turnover related to a cooperative society. The appellant provided documents to support this claim, but the authorities found them insufficient as they were not submitted during the initial assessment. However, the appellant's representative argued that the deposits should be considered as business turnover, citing precedents and the nature of the appellant's business activities. Ultimately, the ITAT agreed with the appellant, emphasizing the regularity of deposits and withdrawals in the bank account as indicative of business turnover. As a result, the addition of Rs.33,57,510/- as unexplained investment was deleted, and the appeal was allowed.