2026 (1) TMI 677 - AT - Income Tax

Bank cash deposits in kirana business found explained; addition u/s69 quashed, appeal allowed under presumptive s.44AD

Whether bank cash deposits constituted unexplained cash credits under s.69: ITAT held that the assessee furnished contemporaneous bank statements, cash ... Addition u/s 69 - cash deposit in bank account - Burden of proof - Reliance on documentary evidence - Matching of bank deposits with turnover - HELD THAT:- A perusal of the bank statement placed in the paper book demonstrates that the pattern of deposits broadly corresponds with the daily sales recorded, and further, there are regular withdrawals from the same bank account by the assessee, which the assessee has claimed were utilized for purchase of goods. Department has not brought on record any cogent material to controvert the explanation furnished by the assessee or to demonstrate that the cash deposits originated from any source other than the business receipts of the assessee. Even in the remand report, the AO has not recorded any specific adverse finding to the effect that the assessee did not carry on kirana business during the year under consideration or that the sales recorded were fabricated. Objections raised by the AO primarily relate to the absence of VAT returns or purchase bills, however, considering the nature and scale of business, the assessee being a small kirana trader operating in a rural area, and claiming to be covered by the presumptive provisions of section 44AD the insistence on such records cannot, in the facts of the present case, be made the sole basis for rejecting the explanation when contemporaneous cash book, sales register and bank entries support the assessee’s version. We find merit in the contention of the assessee that when the cash deposits are commensurate with turnover disclosed by the assessee and the bank deposits and withdrawals follow a business pattern, the same cannot be treated as unexplained merely on the basis of technical deficiencies or nonmaintenance of supporting documentation, particularly when the Department has not brought any material to show that the deposits are from undisclosed sources. In view of the matching figures between the sales and deposits, the concomitant withdrawals for purchase of goods, absence of any contrary evidence from the Revenue, and applying the principle that when a plausible explanation supported by concurrent records is furnished, the same cannot be rejected without any positive material, we hold that the addition made u/s 69 of the Act is unsustainable. Appeal of the assessee is allowed. Issues: (i) Whether cash deposits of Rs. 20,23,800/- in the assessee's bank account can be treated as unexplained investment under Section 69 of the Income-tax Act, 1961; (ii) Whether the assessee, running a small kirana business and claiming presumptive taxation under Section 44AD of the Income-tax Act, 1961, has satisfactorily explained the source of the deposits and is entitled to have the addition deleted.Issue (i): Whether cash deposits of Rs. 20,23,800/- can be treated as unexplained investment under Section 69 of the Income-tax Act, 1961.Analysis: The Tribunal examined the bank statements, sales register, cash book and trading results filed by the assessee which showed total sales broadly matching the bank deposits. The Assessing Officer and CIT(A) had not produced any positive material to demonstrate that deposits originated from undisclosed sources. The remand report did not record any specific adverse finding that the assessee did not carry on the kirana business or that the sales were fabricated. Given the nature and scale of the small rural kirana business and the presence of concurrent records showing commensurate turnover and business-pattern withdrawals, technical deficiencies in supporting documents were not held to be decisive in the absence of contrary evidence from the Revenue.Conclusion: The addition under Section 69 is deleted; this conclusion is in favour of the assessee.Issue (ii): Whether the assessee claiming presumptive taxation under Section 44AD has sufficiently established that the deposits are business receipts and is therefore protected from the addition.Analysis: The Tribunal recognized that presumptive taxation under Section 44AD does not strictly require maintenance of detailed purchase bills for a small eligible business. The assessee produced contemporaneous sales register, cash book and bank entries showing turnover of approximately Rs. 22 lakhs, with bank deposits and withdrawals consistent with business operations. The Revenue failed to rebut this with positive evidence. The insistence on VAT returns or purchase bills was held not to be a sole basis for rejecting the assessee's explanation given the scale and rural nature of the business and the corroborative records furnished.Conclusion: The assessee's claim of business receipts consistent with presumptive taxation is accepted; this conclusion is in favour of the assessee.Final Conclusion: The Tribunal concluded that the assessee furnished a plausible and concurrent explanation supported by records for the bank deposits and, in absence of any positive contradictory material from the Revenue, the addition under Section 69 sustained by the lower authority is unsustainable and is deleted.Ratio Decidendi: Where bank deposits are commensurate with contemporaneous sales records and withdrawals show a business pattern, and the Revenue produces no positive material to the contrary, such deposits cannot be treated as unexplained investment under Section 69 of the Income-tax Act, 1961.