Bank deposits with matching withdrawals for business purchases cannot be added as unexplained income when adequately explained

ITAT Indore ruled in favor of the assessee in a case involving unexplained bank deposits. The assessee, engaged in cattle feed trading, had deposits and withdrawals in their bank account with narration "y/s" (yourself), indicating draft transactions for goods purchases. The AO added entire deposits to income without considering bank statements showing corresponding withdrawals through drafts. ITAT found the addition unjustified as the assessee adequately explained deposits as sale proceeds with matching withdrawals for purchases, deleting the addition entirely.

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Issues involved:
The issues involved in the judgment are condonation of delay in filing the appeal and the addition of bank deposit in the assessment order.

Condonation of Delay:
The appeal was filed with a delay of about one year due to the appellant's health issues and lack of awareness about the impugned order. The appellant, belonging to a rural area, was not served with the order and only became aware when the bank account was attached. The delay was explained as unintentional and the appellant's CA advised filing the appeal before the Tribunal. The authorized representative's email ID was used for communication, and the delay was condoned considering the circumstances.

Addition of Bank Deposit:
The appellant did not file a return of income initially, and the AO issued a notice under section 148 to assess the income based on a bank deposit. The appellant explained that the deposit was from the sale proceeds of trading in Cattle Feed and payments were made through bank drafts. The AO accepted the return income, but a revision was made by the Pr. CIT directing further examination. The AO assessed the entire deposit to tax, leading to an appeal. The appellant argued that the addition was unjustified as the bank account statements supported the explanation of the source of deposit. The AO and Ld. CIT(A) justified the assessment based on failure to explain the source. The Tribunal found that the bank account statements clearly reflected transactions through bank drafts, supporting the appellant's explanation. Consequently, the addition made by the AO was deemed unjustified and deleted. The challenge to the validity of reopening was not addressed due to the decision on the merit issue.

In conclusion, the appeal was allowed in favor of the appellant, and the addition of the bank deposit was deleted based on the supporting evidence from the bank account statements.

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