TaxTMI 
TaxTMI 
2022 (7) TMI 1137
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.... Tax Act, 1961 on account of cash deposited by the assessee in his bank account which is fully explained. 2. Under the facts and circumstances of the case the Learned CIT(A) has erred in confirming the addition of Rs. 5,50,000/- on account of capital introduced in firm without considering the submission of the assessee. 3. The assessee craves your indulgence to add amend or alter all or any grounds of appeal before or at the time of hearing." 4. The facts related to this case as culled out from the records is that the return of income was filed by the assessee u/s 139(1) of the Income tax Act 1961 on 14.12.2013 declaring total income of Rs. 3,00,580/-. Subsequently, on possession of information regarding holding a bank account with Oriental Bank of Commerce, Branch- Govindgarh, Chomu, Jaipur, as undisclosed, necessary reasons were recorded and after obtaining necessary approval from Addl. CIT, Range-7, Jaipur on 23.03.2017, notice u/s 148 was issued on 24.03.2017 and the case was re-opened. The notice was served upon the assessee through Regd. Post. In compliance to the notice, the AR of the assessee appeared on 10.04.2017 and furnished power of attorney with c....
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....e to the notice u/s. 148 of the Act. The assessee also filed the cash flow for this account. 5. The ld. AO has not considered the contentions of the assessee and added a sum of Rs. 53,83,000/- as unexplained cash credits being the cash deposited into the bank account of the assessee which was not disclosed in the return filed u/s. 139 of the Act. The ld. AO has also added a sum of Rs. 5,50,000/- being the amount of cash introduced in the firm M/s. Dhansil Eicher Tractors as unexplained cash credits. 6. Aggrieved from the order of the assessing officer, the assessee has taken the matter before the first appellate authority and did not get success and therefore, this appeal is taken up before this bench. The relevant findings of the first appellate authority in respect of both the additions are extracted here in below for the sake of brevity: Finding of NFAC on addition of Rs. 53,83,000/- 4.3 I have carefully gone through the assessment order as well as the submissions made by the appellant. In this case, the reasons for reopening the assessment by issue of notice u/s.148 was that the appellant was maintaining an undisclosed bank account. This fact is clearly mentio....
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.... the addition made by the AO of Rs.53,83,000/- is confirmed. The grounds of appeal No.1 & 2 are Dismissed. Finding of NFAC on addition of Rs. 5,50,000/- 5.3 I have carefully gone through the assessment order as well as the submissions of the appellant. The appellants has given merely bland explanation in the written submission that he has contributed the cpaital by his accumulated savings and agricultural income and withdrawals made by firm from earlier years. However, no details of any such savings or income or withdrawals have been given. It is also a fact that entire cash transaction from the bank account in Oriental Bank of Commerce has been stated to be used for the purpose in trading in tractors and parts. Thus, the capital contributions of Rs.5,50,000/- is from unexplained sources. Consdierign the facts of the case, addition of Rs.5,50,000/- made by the AO is confirmed. Grounds of appeal No.3 is dismissed. 7. The ld. AR appearing on behalf of the assessee has placed their written submission which is extracted in below; "The assessee is an individual. Return was filed on 14.12.2013 declaring total income at Rs. 3,00,580/-. Subsequently, on possession o....
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.... tractor parts and sales of tractor on commission basis. During the year the assessee has collected orders from various farmers along with advances and deposited the amount in his bank account and in this process the assessee has made total sales of Rs. 25,50,000/- on which the assessee is offering the income of Rs. 2,04,000/-. Therefore the revised computation of assessee's income is enclosed herewith. 2. The cash flow statement of the assessee is as under: - Date Opening balance Receipts Deposit in bank Balance 01.04.2012 Opening cash balance 125000 10.04.2012 Cash withdrawal 900000 1025000 06.09.2012 Cash deposit 570000 455000 17.09.2012 Cash withdrawal 560000 1015000 24.09.2012 Cash deposit 123000 892000 03.10.2012 Cash deposit 346000 546000 30.10.2012 Cash withdrawal 100000 646000 07.11.2012 Cash withdrawal 350000 996000 22.11.2012 Cash deposit 150000 846000 03.12.2012 Cash withdrawal 200000 1046000 13.12.2012 Cash depos....
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.... (i) That the assessee has introduced Rs. 13,00,000/- as capital in the partnership firm out of above withdrawals made on 03.09.2012, 12.09.2012 and 18.10.2012 which is part of total capital introduction in M/s Dhansil Eicher Tractors so out of total capital introduction of Rs. 13,00,000/- Rs. 7,50,000/- was withdrawal from disclosed bank account and remaining amount of Rs. 550000/- was from different source. Therefore he made addition separately for the same and also disallow the claim of the assessee in cash flow statement which tantamount to the double addition. (ii) That the assessee's claim of payment of Rs. 6,00,000/- was made to Dhansil Motors Ltd where the same payment the assessee has claimed as payment to suppliers. The assessee has purchased tractor and motor parts from M/s Dhansil Motors Ltd and make the payment again supply of purchased goods. Therefore the claim of the assessee was correct and genuine. In this regard the submission of the assessee is that the assessee was engaged in the trading of tractor and motor parts and this account was used for the purpose of this business by the assessee. The assessee has declared total sales of Rs. 25,50,00....
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.... above cases it has been held that the deposits and withdrawal were made regularly in saving bank account of assessee during the year hence it can only be treated as his business turnover and only profit on the same should be treated assessee's business income. the assessee is carrying on a small business of dairy products through cash transactions and in absence of any other source of income, the total deposits made in the assessee's saving bank account can be considered as his business turnover which gets support from the observation of the assessing officer for the year under ITA No. 327/Agra/2017 Asst. year : 2011-12 consideration and the AO's observation in assessment of the preceding year where on identical facts, the trading turnover of "dairy business" of the assessee, cash deposits from cash transactions has been accepted as his business turnover and the profit disclosed in the return was accepted. Likewise the Hon'ble ITAT held that the whole deposit or peak credit cannot be added in the hands of the assessee. Copy of both the orders are enclosed herewith in paper book page no.__ Therefore you are requested to delete the addition confirm by the Learne....
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....der to the ld. DR's argument the ld. AR of the assessee placed a reliance on the decision of the co-ordinate bench decision which is extracted for the convenience: "14. Considering the facts as discussed above that the cash deposit and withdrawal in the bank account was made regularly by the assessee during the year, it is very reasonable to say that the same was business turnover and therefore only gross profit addition is justified in the facts of the present case. Hence, we are not inclined to agree with the finding of the Ld.CIT(A) in observing that of peak cash deposits in bank account, endorsing the observation of the AO which was against the principle of 'rule of consistency' on comparison to the preceding Assessment Year and nature of retail milk business of the assessee.In our considered opinion, such deposits in the bank account would certainly constitute business turnover of the assessee and the income disclosed in the return is justified as reasonable business profit for the year under consideration. 15. In the above view and following the decision of ITAT Lucknow bench, we accept the grievance of the assessee as justified. Accordingly, the addition of....
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..... It has also been noticed that the appellant is partner in firm M/s. Namaskar Textiles from where he is deriving salary and share income. M/s. Namaskar Textile is also dealing in purchase and sale of cloth and has disclosed a GP rate of 13.80% on its turnover. Therefore it can be assumed that the appellant has also earned gross profit @13.8% on sale of Rs.15,68,500/- which works out to Rs.2,16.453/-. Thus the addition is sustained to the extent of Rs.2,16,450/-. The appellant thus gets a relief of Rs.13,52,050/-." 4.1 From the above Paras from the order of learned CIT(A), it is seen that a clear finding has been given that on perusal of the entries reflected in the said bank account, it was revealed that the cash deposits and withdrawals were made regularly during the year and therefore the Assessing Officer was not justified in making the addition of Rs.15,68,500/-. Considering these facts, learned CIT(A) has held that these receipts should be treated as turnover of the assessee from trading of cloth and has directed the Assessing Officer to make addition of profit from such turnover outside the books at gross profit rate of 13% of this turnover. Considering the facts, a....