Telescoping of disclosed income against estimated bogus turnover additions and deletion of demonetisation cash deposit addition

Where bogus turnover is estimated to yield commission income, income already disclosed on the same transactions may be telescoped against the estimated addition, but only to the extent of net income actually offered in the return; the gross profit from non-genuine business transactions is not available for such set-off. Cash deposits made during demonetisation were not treated as unexplained money because the assessee substantiated cash withdrawals, availability of cash balance, and subsequent redeposit through bank statements and books. Credit for self-assessment tax was to be allowed after factual verification, with the matter restored to the Assessing Officer for that limited purpose.

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Issues: (i) whether income already offered in the return could be telescoped against estimated commission income arising from alleged bogus turnover and investments; (ii) whether cash deposits made during the demonetization period were liable to be treated as unexplained money; (iii) whether credit of self-assessment tax was to be allowed on verification.

Issue (i): whether income already offered in the return could be telescoped against estimated commission income arising from alleged bogus turnover and investments.

Analysis: The assessee's turnover was treated as bogus and commission income was estimated at 1% on the reported turnover and fresh investments. The income already returned on the same transactions was available in the books, and the earlier co-ordinate bench decisions in the assessee's own cases supported telescoping of such income against the estimated commission income. However, the telescoping could be applied only to the net income already offered and not to the gross profit, because the business transactions themselves were treated as non-genuine.

Conclusion: Telescoping of the income already offered was allowed against the estimated commission income, with recomputation directed to the Assessing Officer.

Issue (ii): whether cash deposits made during the demonetization period were liable to be treated as unexplained money.

Analysis: The assessee furnished date-wise details of cash withdrawals and showed that the withdrawn cash remained available and was subsequently deposited during demonetization. The record contained bank statements and books of account supporting the explanation, and no adverse material was brought to dislodge it.

Conclusion: The addition treating the cash deposits as unexplained money was deleted.

Issue (iii): whether credit of self-assessment tax was to be allowed on verification.

Analysis: The self-assessment tax was stated to be reflected in Form 26AS, and the matter required factual verification by the Assessing Officer.

Conclusion: The Assessing Officer was directed to grant the tax credit after due verification.

Final Conclusion: The appeal succeeded on the principal additions relating to telescoping and cash deposits, while the claim for tax credit was restored for verification, leaving the assessee with partial relief.

Ratio Decidendi: Where bogus turnover is estimated to yield commission income, income already disclosed on the same transactions may be telescoped against the estimated addition, but only to the extent of net income actually offered in the return.

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