2026 (2) TMI 264

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...."AY"] 2012-13, the assessee has filed this appeal on various grounds mentioned in Appeal- Memo (Form No. 36). 2. The background facts leading to present appeal are such that the assessee-individual did not file any return of income of AY 2012-13. The AO, on the basis of information available in AIR database of Income-tax Department revealing the total deposits of Rs. 10,27,541/- made in assessee's bank a/c with S.B.I. during the previous year 2011-12 relevant to AY 2012-13 under consideration, issued notice dated 27.03.2019 u/s 148. The AO also issued notices u/s 142(1). However, the assessee did not make any response to those notices. Ultimately, the AO passed ex-parte assessment-order assessing a total income of Rs. 10,28,064/- consist....

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....s of small business of electricity contractor carried on by assessee. Ld. AR drew the bench to the various deposits entries to show that most of the deposits are of small or moderate amounts in hundreds/thousands of rupees spread over the year which are also followed by cash withdrawals of small or moderate amounts in hundreds/thousands throughout the year. Further, the running and closing balance in bank a/c is also negligible. There are neither heavy deposits/withdrawals nor there is any inordinate balance in assessee's a/c justifying the addition made by AO. 5. Having submitted these facts, Ld. AR submitted that in the situation of assessee, the AO ought to have assessed only income element instead of deeming the entire gross-receipts....

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....from undisclosed sources. 8. It is a settled principle that where deposits in a bank account are found to be linked with business activity, the entire deposits cannot be treated as income of the assessee. In such circumstances, only the income element embedded in the gross receipts can be brought to tax. Therefore, the approach adopted by the AO in taxing the entire deposits is not sustainable. Considering that the assessee is a petty electrical contractor and the pattern of bank transactions, we are of the considered view that the estimation of income is the most appropriate course in present case. The submission of the Ld. AR to apply presumptive taxation provisions of section 44AD is reasonable and justified. At the same time, the sug....