SHRI RAJA DAGA,JAIPUR vs. INCOME TAX OFFICER, WARD-2-2, JAIPUR

In this appeal, the assessee is aggrieved for reopening of assessment U/s 147 of the Act and also against the action taken by the ld. CIT(A) in upholding the peak credit addition of Rs. 4,34,019/- in respect of cash deposit in the bank account.

2 ITA 612/JP/2018_ Raja Daga Vs. ITO 3. We have gone through the orders of the authorities below and found from the record that as per AIR information available on the system it was noted that the assessee had deposited cash and paid Rs. 37,46,736/- against credit card bills for the F.Y. 2008-09 relevant to A.Y. 2009-10 under consideration. From the record of the ITO, Ward 2(3), Jaipur it was noticed that the assessee had not filed his return of income for the assessment year under consideration. Hence, the above payment against credit card bills and cash deposited in Axis bank Ltd. by the assessee was not verifiable. Therefore, notice U/s 148 was issued on 23/03/2016 by the ITO Ward 2(3), Jaipur after recording reasons and taking prior approval from the Pr.CIT-1, Jaipur.

During the course of reassessment proceedings, the A.O. added entire amount of cash deposited in the bank account amounting to Rs. 24,70,500/- on the plea that the assessee could not explain the source of deposit.

By the impugned order, the ld. CIT(A) upheld the addition of peak credit to the bank account amounting to Rs. 4,34,019/- against which the assessee is in further appeal before the ITAT.

We have considered the rival contentions and carefully gone through the orders of the authorities below and found from the record

We found that the assessee was a small trader and under presumptive scheme, not supposed to maintain books of account. So far as the business of selling of wedding cards was concerned, the assessee has already offered income of Rs. 76,128/- by applying 8% on the gross receipts of Rs. 9,51,603/- U/s 44AD of the Act. In respect of income receipt on decoration and furnishing, the assessee had shown only profit of Rs. 44,860/- and since the assessee has failed to produce any of the bills and expenditure incurred for such business, the income declared by the assessee cannot be accepted.

Considering the facts and circumstances of the case, we found that entire amount deposited in the bank account was out of the sale proceeds of wedding cards and business of decoration and furnishing. Thus the 5 ITA 612/JP/2018_ Raja Daga Vs. ITO cash of Rs. 24,70,500/- so deposited was out of the sale proceeds of his businesses of furnishing and decoration, which was more than the amount of cash so deposited in the bank account. Business of interior decoration cannot be treated as trading activity so as to take profit at 5% of gross receipts. Therefore, in all fairness, we direct the A.O. to compute profit @ 10% of gross receipt of Rs. 27,89,580/- in respect of amount received from decoration and furnishing. Thus, the profit works out to be Rs. 2,78,958/-. Accordingly, we direct the A.O. to compute the income of the assessee is as under: (i) Profit on wedding card business as offered by the assessee amounting to Rs. 76,128/-. (ii) Income from decoration and furnishing amounting to Rs. 2,78,958/- & (iii) Interest income amounting to Rs. 15,720/-. Total amounting to Rs.3,70,806/-. In view of the above, we direct the A.O. to restrict the addition to the above extent in place of peak credit computed by the ld. CIT(A).