NARAYANSINGH RAJPUROHIT,WARANGAL vs. INCOME TAX OFFICER, WARD-3, HYDERABAD

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ITA 23/HYD/2020Status: DisposedITAT Hyderabad28 June 2021AY 2007-083 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal accepted the cash deposits as business receipts, acknowledging some evidence of tailoring business purchases and the assessee offering business income in subsequent years. The AO was directed to estimate 5% of the cash deposits as business income.

What were the facts?

The Assessing Officer (AO) treated cash deposits of Rs. 16,40,717/- in the assessee's bank account as unexplained investments under Section 69. The assessee claimed these deposits were from his tailoring business, but could not provide sufficient evidence initially.

What were the issues?

Whether cash deposits in a bank account can be treated as unexplained investments when the assessee claims they are from a business, and if so, how to estimate the income from such business.

Which sections of the Income-tax Act were involved?

Section 69,Section 44AF

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, HYDERABAD ‘SMC’ BENCH : Hyderabad

Before: Smt. P. Madhavi Devi

Hearing: 23/06/2021Pronounced: 28/06/2021

Date of Hearing : 23/06/2021 Date of Pronouncement 28/06/2021 O R D E R This is assessee’s appeal for AY 2007-08 against the order of the CIT(A)-10, Hyderabad dated 22.11.2019.

2.

Brief facts of the case are that the assessee individual filed his return of income for the A.Y. 2007-08 on 03.01.2008 admitting income from other sources of Rs. 97,500/-. During the assessment proceedings u/s 143(3) of the Income Tax Act, 1961, the A.O. observed that the assessee has made cash deposits to the extent of Rs.26,59,343/- in his bank account maintained with Axis Bank. The A.O. asked the assessee to explain the sources, but assessee could not explain the sources for the deposits and also did not produce any evidence in support of his contentions. The AO, therefore worked out peak of the cash credits at Rs.16,40,717/- and treated it as unexplained investments u/s 69 of the I.T.Act, 1961 and brought it to tax.

Sri Narayan Singh Rajpurohit .

3.

Aggrieved, assessee preferred appeal before the CIT(A) who confirmed the order of the AO and assessee is in second appeal before the Tribunal by raising the following grounds of appeal.

1. The Appellate order passed by CIT (Appeals)-10, Hyderabad confirming the addition of Rs.16,40,717/- made u/s. 69 of I.T. Act is against the facts of the case and provisions of Income Tax Act, 1961. [Rs. 5,28,983/-]

2. The CIT (Appeals) erred on facts and in law in sustaining the addition of Rs. Rs.16, 40,717/- u/s.69 alleged to be the peak amount of cash deposits in Axis Bank made on series of dates. [Rs. 5,28,983/-] 3 . Appellate Order was passed after almost 6 months mechanically sustaining the additions practically not considering the Written Submissions.

4. A.O and CIT (Appeals) ought to have seen that the Bank Statement clearly stated the identification of Cheques given to suppliers establishing the Business.

5. The Appellate therefore, prays in the view of above and detailed grounds to be urged at the time of hearing , Honorable ITAT may be pleased to delete the addition of Rs. 16,40,717/-

4. On perusal of the material on record, I find that before the CIT(A), the assessee had appeared and submitted that these cash deposits are out of his turnover from tailoring business and also filed some evidence regarding purchase of material of such business. The CIT(A) called for a remand report from the AO and the AO has reported that except for a few purchase bills produced by assessee relevant to F.Y 2005-06, there is no other material produced by assessee to establish the link between cash deposits in bank accounts with sales/ business. Therefore he confirmed the order of the A.O.

5.

I find that the AO in the remand report has accepted that there were few purchase bills for tailoring material and, therefore, assessee’s contention of carrying on tailoring business cannot be ruled out totally. It was further submitted by learned counsel for the assessee at the time of hearing that this is the first year when the assessee had filed his return of income and in the subsequent years, the assessee has offered income from the business of 2

Sri Narayan Singh Rajpurohit . tailoring which has been accepted by the A.O. and, therefore, cash deposits should be considered as business income of the assesse and income estimated thereon.

6.

Ld.DR was also heard.

7.

Since there is some relationship established between the purchase bills of the assessee and the alleged tailoring business of the assessee and to set at rest this issue, I am inclined to accept the cash deposits of the assessee as his business receipts and as the assessee has declared 5% of the turnover as income of the assessee u/s 44 AF of the I.T.Act, 1961, I direct the AO to estimate 5% of the cash deposits also as business income of the assessee and bring it to tax. Both the learned counsel for assessee as well as ld.DR agreed for this addition. Assessee’s appeal is accordingly treated as partly allowed.

8.

In the result, the appeal of the assessee is partly allowed.

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