SHRI NARENDRAKUMAR BHUPENDRABHAI PATEL,MEHSANA vs. THE INCOME TAX OFFICER, WARD-2, NOW WARD-4, PATAN

The captioned appeal has been filed at the instance of the assessee against the order of the Commissioner of Income Tax (Appeals), Gandhinagar (‘CIT(A)’ in short), dated 26.10.2015 arising in the assessment order dated 31.12.2013 passed by the Assessing Officer (AO)

The grounds of appeal raised by the assessee read as under:

The assessee, a proprietor of Nokia Electronics, filed his return of income for AY 2011-12 declaring total income of Rs.1,64,460/-. The return filed by the assessee was subjected to scrutiny assessment. In the course of scrutiny assessment, the AO observed that closing bank balance in the balance sheet of Nokia Electronics did not match with the closing balance in the various bank statements of the proprietary concern. The AO found difference of Rs.20,618/- in the bank balance of Oriental Bank of Commerce (OBC) and Rs.2,11,513/- in Market Yard Commercial Co- operative Bank. The AO also found that certain cash deposits amounting to Rs.6,80,000/- in the saving bank account of OBC in individual name and Rs.6,10,000/- in current account of OBC. The AO did not find the explanation towards such differences and deposits to be satisfactory and accordingly added the aggregate amount of Rs.15,22,231/- on account of such differences and deposits. [Narendrakumar B. Patel vs. ITO] A.Y. 2011-12 - 3 -

Aggrieved, the assessee preferred appeal before the CIT(A) without any success.

Further aggrieved, the assessee preferred appeal before the Tribunal.

We have heard the rival submissions on the reconciliation of differences in the bank account and unexplained cash deposits. As pointed out on behalf of the assessee, we note that assessee is a small trader of electronics items. The balance sheet submitted in the course of assessment proceedings were based on incomplete accounts and admittedly many bank transactions were not incorporated resulting in reconciliation differences. The assessee is stated to have recast the books of accounts incorporating all the entries and filed the same before the Revenue authorities. According to the newly constructed balance sheet (placed in paper book), the capital account of the assessee stands at a meager amount of Rs.1,65,010/- only. The total resources including the liability stands at Rs.3,80,330/-. The assessee has claimed that it is engaged in the fringe business of purchase and sale of old television sets and the amount deposited have been regularly withdrawn from time-to-time and recycled in the business. The aforesaid submission of the assessee appears correct from the summery of the cash statement showing deposits and withdrawals in the bank. The differences in the bank statement has been also reconciled before the CIT(A). The assessee has also pointed out such facts to the AO in the remand proceedings. Having regard to the meager turnover of less than Rs.40 Lakhs, the assessee is not expected to maintain regular books of accounts under the presumptive taxation scheme prescribed in Section 44AD of the Act. It is also noticed that assessee claims to have submitted copy of sales register, purchase register and quantitative details before the CIT(A). In such circumstances and having regard to the smallness of the transaction, the explanation offered by the assessee is considered to be broadly satisfactory. Therefore, the addition on account of reconciliation differences amounting to Rs.2,11,513/- and Rs.20,618/- stands deleted. As regards cash deposits of Rs.6,80,000/- and Rs.6,10,000/-, we direct the AO to estimate income applying 5% thereon in tune with Section 44AF of the [Narendrakumar B. Patel vs. ITO] A.Y. 2011-12 - 4 - Act. The addition of Rs.64,500/- is thus sustained and remaining addition stands deleted.

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