IQBAL MAENUDDIN SHAIKH,MUMBBAI vs. INCOME TAX OFFICER WARD22(1)(6), MUMBAI

When the appeal was called up for hearing the registry informed that the appeal was filed with a delay of 1987 days. The assessee filed a petition for condonation of delay and explained that due to lack of communication with the consultant, the appeal could not be pursued properly. Further, the wife of the assessee was suffering from cancer and the assessee was under severe mental and financial pressure, being completely occupied with her medical treatment. The assessee, therefore, pleaded that the delay may be condoned, and the matter taken for adjudication. The Ld.DR had not made any strong objection against the condonation plea of the assesse. Accordingly, we condone the delay for 1987 days and the appeal is taken for adjudication.

The brief facts of the case are that the assessee is a trader of readymade garments. The return was filed u/s 139(1) of the Act by declaring total income at Rs.2,26,145/-. During the assessment proceedings, the Ld.AO found that the assessee deposited cash of Rs.59,86,710/-. The assessee could not explain the cash deposits in the bank account properly. Therefore, the Ld.AO made addition of Rs.59,86,710/- u/s 69A of the Act being the unexplained cash deposit in the bank account. Aggrieved assessee filed an appeal before the Ld. CIT(A). The Ld.CIT(A) issued various notices of hearing. But no compliance was made from assessee’s end. Finally, from the facts of the appeal in Form 35, a speaking order was passed by dismissing the appeal of the assessee. Being aggrieved, the assessee filed an appeal before us.

The assessee personally appeared and submitted that he is a small trader engaged in modest business activities. He produced the Profit and Loss Account

The Ld.DR argued and stands in favour of the order of the revenue authorities. The Ld.DR invited our attention to impugned appellate order, para 5 which is reproduced below:- 5. I have considered the facts mentioned in the assessment order. The appellant did not make compliance to any of the hearing notices issued by this office. Neither any written submission was filed by the appellant. Therefore, the facts mentioned by the assessee in the statement of facts filed with form 35 is being considered.

1 In the statement of facts and grounds of appeal annexed with form No.35, it has been mentioned that the A.O. omitted certain points. The A.O. in his order had agreed that the only source of income of assessee is from income from business and profession and the return of income reveals a profit of Rs.2,90,153/- arising from trading of clothes and readymade garments as resale. All the documents in response to questionnaire u/s. 142(1) issued on 25/01/2016 were filed by the appellant. However, during final dates of March 2016 the A.O. looked in hurry to pass the assessment order by making addition of Rs.59,86,710/- as unexplained income u/s. 69A without allowing proper opportunity of being heard. Section 69A says that if the assessee is found to be in possession of any money, bullion etc. but fails to explain the source. The A.O. wrongly treated cash deposited in Bank as held in possession of the assessee and assessee a complete owner of that cash. The A.O. ignored the fact that there was withdrawals from saving A/cs. also. The appellant has relied on the decision of ITAT Delhi in case of Deepali Sehgal, Meerut Vs. Department of Income tax ITA No.5660/Del/2012, ACIT Vs. Baldev Raj Chalra 121 TTJ 366 (Delhi) 2009, R.K. Dave Vs. ITO 94/ITJ Jodhpur 19(09/08/2004) and Hemant Prabhakar Vs. DCIT 31 Tax world 198 (JP). The A.O. had already agreed about nature of business of assessee is trading in garments i.e. he buys garments from open market and sells them. Also the presumptive taxation u/s. 44AD inserted by Finance Act, 2012 can be availed by all assessees whose turnover is less than 100 Lakhs can declare his income @8% of his total turnover and is exempted in maintenance of Books of A/cs. u/s. 44AA of the I.T. Act, 1961. Here the Government also presumes the normal profit that a normal businessman can raise is 8% of its turnover and not 100%. Just considering the facts of deposits in Bank “is in possession of money” is not proper and the fact of withdrawals are also to be considered. The cash deposits in the Bank A/cs. are receipts from the business and the withdrawals should also be considered as business expenses and therefore, only gross profit is to be taxed. 5.2 The aforesaid facts and arguments advanced by the appellant in statement of facts was considered. However, the appellant did not file even the relevant Bank A/c. which could be examined before arriving at any conclusion as to whether the same represent business receipts or non business receipts. Merely making a claim without any supporting documents does not help the case of the assessee. The assessee has not filed any evidence to provethe cash deposits out

We have carefully considered the rival submissions and perused the orders of the lower authorities along with the material placed on record. The undisputed facts remain that the assessee is a small trader engaged in the business of readymade garments. The return of income was duly filed under section 139(1) declaring total income of Rs.2,26,145/-. During the course of assessment proceedings, the Ld. AO noted cash deposits aggregating to Rs.59,86,710/- in the assessee’s bank account. In the absence of satisfactory explanation and supporting documentary evidence, the Ld. AO treated the same as unexplained money under section 69A of the Act. The Ld. CIT(A), despite issuing multiple notices, did not receive any compliance from the assessee and accordingly sustained the addition. Before us, the assessee personally appeared and explained that he is a small trader having modest turnover. The assessee reiterated that the cash deposits in the bank account were directly linked to business transactions and were utilized for making payments to labourers and suppliers. It was also stated that corresponding cash withdrawals were made from the same accounts and that all the bank accounts had been disclosed in the financial statements. The assessee expressed his inability to produce the bank statements for the relevant financial year but offered to declare profit at the presumptive rate of 8% on the turnover, as per section 44AD of the Act, on the balance turnover of Rs.49,35,827/-. Considering the facts and totality of circumstances, we observe that although the assessee failed to substantiate the entire cash movement through bank records, it 6 Iqbal Maenuddin Shaikh is also apparent that the deposits relate to the assessee’s business activity as a trader of garments. The rigid application of section 69A of the Act without correlating the deposits to business receipts, when the assessee’s line of trade and income disclosure are undisputed, results in excessive taxation.Accordingly, in the interest of justice, we are inclined to accept the assessee’s alternate plea to estimate income at 8% of the balance turnover amount to Rs. 49,35,827/-, following the principles laid down under section 44AD of the Act. The Assessing Officer is directed to compute the income accordingly and delete the balance addition. The appeal of the assessee is partly allowed for statistical purposes.

In the result, the appeal filed by the assessee bearing ITA No.5584/Mum/2025 is partly allowed.

अपील र्थी/The Appellant , 2. प्रदिव िी/ The Respondent. 3. आयकरआयुक्त CIT 4. दवभ गीयप्रदिदनदि, आय.अपी.अदि., म ुंबई/DR, ITAT, MUMBAI 5. ग र्डफ इल/Guard file.