TaxTMI 
TaxTMI 
2026 (9) TMI 1462
X X X X Extracts X X X X
X X X X Extracts X X X X
....e within the time prescribed u/s. 139(1) of the Act. 3. The AO, on the basis of information available on record, noticed that during the relevant previous year there were aggregate credits of Rs. 52,39,458/- in two bank accounts maintained by the assessee with Canara Bank, Sangapalli Branch, Tirupur. Out of the aforesaid aggregate credits, a sum of Rs. 14,83,500/- represented cash deposits made during the demonetization period. 4. During the course of assessment proceedings, the AO issued several statutory notices calling upon the assessee to furnish the requisite details and explain the transactions reflected in the aforesaid bank accounts. However, according to the AO, the assessee failed to comply with the said notices. Subsequently, on 06.12.2019, the assessee filed a return of income declaring total income of Rs. 4,19,870/- by offering its business income under the presumptive scheme of taxation prescribed u/s. 44AD of the Act. The AO, however, observed that the said return was filed beyond the time stipulated in the notice issued u/s. 142(1) of the Act as well as beyond the time prescribed for filing a belated return u/s. 139(4) of the Act and, therefore, did not take c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rther appeal before the Tribunal. 11. We have heard the rival submissions and perused the materials available on record. The solitary issue which arises for our consideration is whether, on the facts and circumstances of the case, the authorities below were justified in treating the cash deposits aggregating to Rs. 14,83,500/- made in the assessee's bank accounts during the demonetization period as unexplained money u/s. 69A of the Act, particularly when the assessee is admittedly carrying on the business of trading in puffed rice and the remaining credits appearing in the very same bank accounts have been accepted by the AO as representing its business turnover. 12. At the outset, it is an undisputed fact that the assessee is a partnership firm engaged in the business of trading in puffed rice. It is also not in dispute that during the relevant previous year aggregate credits of Rs. 52,39,458/- were found in the two bank accounts maintained by the assessee with Canara Bank, Sangapalli Branch, Tirupur. Out of the aforesaid total credits, a sum of Rs. 14,83,500/- represented cash deposits made during the demonetization period, whereas the balance credits amounted to Rs. 37....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the assessee's business turnover. Once the Revenue accepts that the bank accounts were being used for the purposes of the assessee's business and that credits therein represented business receipts, there must be some cogent material on record before a part of the credits appearing in the very same accounts could be carved out and assigned an altogether different character as unexplained money. We find no such material brought on record by the AO. 17. Significantly, the AO has not pointed out any independent or undisclosed source from which the impugned cash of Rs. 14,83,500/- could have emanated. There is no finding that the assessee was carrying on any activity other than its disclosed business of trading in puffed rice. There is also no material brought on record to establish that the impugned cash deposits represented receipts from any source unconnected with the assessee's business. No incriminating material, unexplained asset, investment or expenditure relatable to any alleged undisclosed source has been identified by the AO. In the absence of such material, the conclusion that the cash deposits constituted unexplained money rests merely upon presumption. 18....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t by showing 8% of the gross collection. Though the AO declined to recognize the said return as a valid return on account of its belated filing, the Ld.CIT(A) has specifically relied upon the income disclosed therein and enhanced the assessed business income from Rs. 3,00,476/- to Rs. 4,19,870/-. Having adopted the business income disclosed by the assessee in the said return for the purpose of enhancement, the Revenue cannot, at the same time, completely disregard the factual assertion underlying such disclosure, namely, that the assessee was carrying on the disclosed business and earning income therefrom. The evidentiary value of the particulars furnished by the assessee does not disappear merely because the return was filed beyond the statutory period. 22. It is also pertinent to observe that an assessment framed u/s. 144 of the Act, though necessarily based upon the best judgment of the Assessing Officer, cannot be arbitrary or founded merely upon conjectures and surmises. The expression "best judgment" necessarily postulates a fair and reasonable estimate based upon relevant material available on record. The absence of compliance by the assessee may entitle the AO to proceed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ablish a reasonable basis for excluding such amount from the business receipts and treating it as arising from an unexplained source. Such foundational exercise is conspicuously absent in the orders of the authorities below. 26. The Ld.CIT(A), while sustaining the impugned addition, has principally proceeded on the failure of the assessee to satisfactorily establish the source of the cash deposits. However, in our considered view, the matter cannot be examined in isolation from the undisputed surrounding circumstances. The assessee had an existing business; the bank accounts were admittedly used in connection with such business; substantial credits in those very accounts were accepted as business turnover; and no other source of income or activity capable of generating the impugned cash has been identified by the Revenue. These facts constitute material circumstances which could not have been brushed aside merely because the deposits were made during the demonetization period. 27. The deeming provisions contained in sections 68 to 69D of the Act are intended to bring to tax amounts whose nature and source remain unexplained. Such deeming provisions cannot be invoked mechanica....