Tax Tribunal allows appeal, deletes unexplained cash deposit additions, upholds penal interest, and partly allows appeal.

The Tribunal partly allowed the appeal, directing the deletion of additions related to unexplained cash deposit and deemed profit. The addition under section 68 of the Income Tax Act was found to lack merit and was deleted. The imposition of penal interest was upheld, and the appeal was partly allowed on 26.07.2023.

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Issues involved:
The issues involved in the judgment are:
1. Addition of Rs. 3,00,00,000 under section 68 of Income Tax Act without providing opportunity for cross-examination.
2. Addition of Rs. 45,000 as unexplained cash deposit in bank.
3. Addition of Rs. 12,80,000 as deemed profit without proper scrutiny of accounts.
4. Imposition of penal interest under sections 234B and 234C of Income Tax Act.
5. Any other ground raised during the hearing.

Issue 1: Addition of Rs. 3,00,00,000 under section 68 of Income Tax Act:
The appellant challenged the addition of Rs. 3,00,00,000 made by the Assessing Officer under section 68 of the Income Tax Act. The appellant argued that the addition was confirmed without providing a copy of the statement by 'another assessee' and without the opportunity for cross-examination. The appellant contended that the identity, creditworthiness, and genuineness of the transactions were established, but the addition was based solely on the statement of 'another assessee'. The Tribunal held that the AO failed to probe the documents furnished by the appellant and did not discredit the affidavits submitted. The Tribunal emphasized the importance of cross-examination and found no merit in the addition, directing its deletion.

Issue 2: Addition of Rs. 45,000 as unexplained cash deposit:
The AO added Rs. 45,000 as unexplained cash deposit in the bank without considering that the amount was from cash in hand. The Tribunal noted that the AO did not discuss the regular books of accounts of the assessee and made the addition based on estimation without rejecting the books of accounts. Citing precedent, the Tribunal directed the AO to delete the addition as it was solely based on estimation.

Issue 3: Addition of Rs. 12,80,000 as deemed profit:
The AO added Rs. 12,80,000 as deemed profit computed at 8% of gross revenue without discussing the regular books of accounts. The Tribunal held that without rejecting the books of account, the AO erred in estimating the profit, contrary to established precedent. Consequently, the Tribunal directed the AO to delete the addition as it was solely based on estimation.

Issue 4: Imposition of penal interest and penalty proceedings:
The AO imposed penal interest under sections 234B and 234C of the Income Tax Act and initiated penalty proceedings under section 271(1)(c). The Tribunal directed the AO to levy interest as per relevant provisions of the law, considering it as consequential in nature.

The Tribunal partly allowed the appeal, directing the deletion of the additions related to the unexplained cash deposit and deemed profit. The Tribunal found no merit in the addition under section 68 and directed its deletion. The imposition of penal interest was upheld, and the appeal was partly allowed on 26.07.2023.

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