Assessee fails to explain Rs 78 lakh cash deposits, addition under section 68 upheld but partial relief granted

ITAT Delhi upheld addition u/s 68 regarding unexplained cash deposits of Rs 78,00,000 as assessee failed to provide satisfactory explanation with supporting documents despite adequate opportunities before AO and CIT(A). Assessee's alternate plea for 8% presumptive taxation was rejected as it would exceed section 44AD threshold limits. However, ITAT deleted 8% addition on remaining turnover of Rs 28,14,676, accepting explanation that portion belonged to assessee's father who had substantial business turnover and some funds represented assessee's own capital and business profits.

---

---

The appeal in this case was directed against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2014-15. The core issues considered by the Appellate Tribunal were the addition of Rs. 78,00,000 under section 68 of the Income-tax Act, 1961, and an adhoc addition of Rs. 2,25,174 on account of profit over suppressed sales. The Appellate Tribunal analyzed the facts of the case, where the assessee, a trader in agro/vegetable products, declared income under section 44AD without maintaining books of accounts. The Assessing Officer noted cash deposits in the assessee's bank account and made the aforementioned additions during assessment proceedings. The Commissioner of Income Tax (Appeals) upheld the additions, considering the lack of documentation regarding the source of the significant payment to TAHA Traders.The Tribunal heard the arguments of the assessee's counsel, who contended that the provisions of section 68 did not apply as the assessee was not required to maintain books of accounts under section 44AD. The counsel emphasized that the Assessing Officer's reliance on the balance sheet and profit and loss account was inappropriate. The assessee claimed the source of cash deposit was from various legitimate sources, including own capital, cash savings, and advances from parties.The Tribunal examined the legal framework and precedents, interpreting the applicability of section 68 in cases where the assessee maintains a cash book despite not maintaining formal books of accounts. The Tribunal found that the cash credits in the cash book fell within the ambit of section 68, supporting the Assessing Officer's actions.Regarding the Rs. 78,00,000 cash deposit, the Tribunal found the explanations provided by the assessee insufficient, lacking supporting evidence or documentation. The Tribunal also dismissed the alternate plea to consider the cash deposit as part of turnover under section 44AD, as it would disqualify the assessee from the benefits of the provision due to exceeding the turnover threshold.On the issue of the adhoc addition of Rs. 2,25,174, the Tribunal found that the balance cash deposit was adequately explained by the assessee's own capital, cash savings, and profits from business activities, as well as potential contributions from the late father. Therefore, the Tribunal deleted this addition.In conclusion, the Tribunal partly allowed the assessee's appeal, sustaining the addition of Rs. 78,00,000 under section 68 while deleting the adhoc addition of Rs. 2,25,174. The decision was pronounced on 12.02.2025.

---