2017 (4) TMI 604 - AT - Income Tax

Tribunal dismisses Revenue's appeal due to lack of prosecution, addresses issues of legal heirs, cash deposits, and book discrepancies.

The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal and the cross-objection due to lack of prosecution. The judgment addressed the ... Addition on cash deposits in the said bank account - Held that:- CIT(A) thereafter made reference to other materials produced before the AO to point out that this bank account was used for the purpose of business and sale proceeds were deposited in this bank account. On the other hand, the ld.AO did not make any such investigation. He simply treated the deposits made in the bank account as unexplained cash credits. Contrary to this, the Revenue has not brought any evidence on record to demonstrate the fact that opinion formed by the ld.CIT(A) is contrary to the details available on record. In words, it has not brought to our notice that inference drawn by the ld.CIT(A) are factually incorrect. The ld.CIT(A) has right observed that total amount appearing as a deposit in the account was not cash credits, rather sale proceeds of the assessee. Turnover of the assessee is to be computed on the basis of all these details and at the most, an estimated net profit can be computed as an income of the assessee. Accordingly, the ld.CIT(A) has confirmed an addition of ₹ 3,50,208/-. We do not find any error in the detailed reasoning of the ld.CIT(A), and accordingly, the appeal of the Revenue is dismissed. Issues involved:1. Failure of the assessee to implead legal heirs after demise.2. Addition of cash deposits in the bank account by the Assessing Officer.3. Discrepancies in the books of account and estimation of net profit.Issue 1: Failure of the assessee to implead legal heirs after demiseThe judgment highlighted that the assessee, who had passed away, failed to implead legal heirs despite the notice served. The Tribunal noted that no application was filed for impleading legal heirs, and efforts to serve notice at the given address were unsuccessful. Consequently, the cross-objection was rejected for want of prosecution due to the absence of legal heirs stepping forward.Issue 2: Addition of cash deposits in the bank account by the Assessing OfficerThe Assessing Officer (AO) had added cash deposits to the total income of the assessee, which was contested in appeal. The CIT(A) re-evaluated the situation and determined that the deposits were not cash but sale proceeds of the business. The CIT(A) recalculated the turnover and estimated the net profit, leading to a reduced addition compared to the AO's initial assessment. The Revenue disagreed with this reduction, arguing that the addition should have been higher.Issue 3: Discrepancies in the books of account and estimation of net profitThe CIT(A) found discrepancies in the books of account maintained by the assessee, highlighting various defects and unreliable entries. The CIT(A) emphasized that the AO did not conduct a thorough investigation into the source of the deposits and failed to establish the deposits as unaccounted income. The CIT(A) rejected the books of account as unreliable and estimated the income based on a reasonable 8% net profit of the turnover. The Tribunal upheld the CIT(A)'s decision, emphasizing the lack of evidence provided by the Revenue to challenge the findings. The appeal of the Revenue was dismissed based on the detailed reasoning provided by the CIT(A), and the cross-objection was also dismissed due to the absence of legal heirs coming forward.In conclusion, the judgment addressed the failure of the assessee to implead legal heirs, the dispute over the addition of cash deposits in the bank account, and the discrepancies in the books of account leading to the estimation of net profit. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal and the cross-objection due to lack of prosecution.