Assessee's appeal partly allowed for unexplained cash deposits under section 69A, addition restricted to 15%

ITAT Hyderabad allowed assessee's appeal partly in a case involving reopening of assessment under section 147 for unexplained cash deposits. The assessee had filed returns for subsequent years showing income from proprietary concern but failed to appear before AO with requisite details regarding deposit sources. AO passed order under section 144 treating entire deposits as unexplained income under section 69A. ITAT, considering that assessee had ceased business and joined government service, directed AO to restrict addition to 15% of total cash deposits as business income taxable at normal rates, deleting balance addition.

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Issues Involved:
1. Validity of proceedings u/s 144 r.w.s 147 of the Income Tax Act.
2. Jurisdiction of the Assessing Officer.
3. Validity of notice issued u/s 148 of the Income Tax Act.
4. Estimation of income from business receipts.

Summary:

1. Validity of proceedings u/s 144 r.w.s 147 of the Income Tax Act:
The assessee challenged the proceedings initiated u/s 144 r.w.s 147 for the A.Y 2013-14, arguing that the addition of Rs. 1,22,19,500/- made u/s 69A was improper. The assessee contended that the entire amount deposited in the bank was considered as income without proper evidence of consultancy business being taken into account.

2. Jurisdiction of the Assessing Officer:
The assessee argued that the ITO Ward-12(2), Hyderabad had no jurisdiction over her as she had no income from salary for the relevant year. The case was transferred to ITO Ward-4(3) due to the business income. However, the AO reverted the jurisdiction back to ITO Ward-12(2) based on the income from salary for the A.Y 2017-18. The Tribunal noted that the jurisdiction was assumed based on the PAN and the nature of income at the time of issuing the notice.

3. Validity of notice issued u/s 148 of the Income Tax Act:
The assessee claimed that the notice u/s 148 dated 21.06.2016 was invalid as it was served by affixture at an old address despite having her email ID in the PAN data. The Tribunal found that the notice was correctly served as per the available addresses and the subsequent notice dated 21.12.2017 did not invalidate the earlier notice.

4. Estimation of income from business receipts:
The assessee contended that the entire deposits could not be added u/s 69A and requested for a reasonable estimation of profit. The Tribunal noted that the returns for A.Ys. 2012-13 to 2014-15 were filed showing income from M/s. Sri Sai Consultancy, and directed the AO to adopt a net profit rate of 15% on the total deposits of Rs. 1,22,19,500/-, resulting in a taxable income of Rs. 18,32,925/-. The balance addition of Rs. 1,03,86,575/- was directed to be deleted.

Conclusion:
The appeal of the assessee was partly allowed, with the Tribunal directing a net profit estimation of 15% on the total deposits, thereby reducing the taxable amount significantly. The Tribunal upheld the validity of the proceedings and notices, and addressed the jurisdictional challenges raised by the assessee.

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