PURAN K JAIN (HUF),MUMBAI vs. INCOME TAX OFFICER, WARD 41 (2) (4 ), MUMBAI

The brief facts of the case are that the assessee is a HUF and the karta is running the business as trader of fans. During this impugned assessment year, Puran K JIN (HUF) the assessee-HUF deposited cash in bank account amount to Rs.10,92,000/-. The assessee submitted that during the demonetization period, the assessee deposited cash amount to Rs.2,83,000/-. The assessee confirmed that during this impugned financial year, the assessee was running the business of the same nature, as the karta was doing and the total sale during this year was Rs.11,00,897/- and the assessee purchased the goods amount to Rs.7,33,162/-. The assessee submitted a re-computation during the assessment proceedings and declared the business income amount to Rs.2,45,543/-. During assessment, the Ld.AO found that the assessee declared only the interest under the head ‘Income from other sources’. No business income was declared. During the assessment proceedings, the assessee submitted the month-wise list for sale and purchase of the goods and accordingly, the cash was deposited in related to the business transactions. The assessee explained the source of cash deposit in the bank account. The details of source of deposit of cash as placed by the Ld.AR which is reproduced as follows:- “Opening Cash Balance as on 01.04.2016 Rs. 42869 Add : Net Surplus Received during 01.04.2016 to 08.11.2016 1061881 Less : Deposited during 01.04.2016 to 08.11.2016 809000 BALANCE AS ON 08.11.2016 295750 IN Form of SBN Details not available IN OTHER DENOMINATIONS Details not available Add : Cash received during 09.11.2016 to 31.12.2016 NIL Less: Cash paid during 09.11.2016 to 31.12.2016 NIL Less: Cash Deposited in Bank during 09.11.2016 to 31.12.2016 283000 Closing Cash Balance as on 31.12.2016 12750 Puran K JIN (HUF) Add : Net Surplus Cash received during 01.01.2017 to 31.03.2017 22302 Less: Cash Deposited in Bank during 01.01.2017 to 31.03.2017 NIL Closing Cash Balance as on 31.03.2017 35052”

The Ld.DR argued and relied on the order of the revenue authorities.

We have carefully considered the submissions made by both parties and reviewed the documents on record. It is evident that the appellate order was passed ex parte, as the assessee was unable to submit any documents before the Ld. CIT(A). However, it is observed that the assessee had furnished certain details before the Ld. AO, who subsequently rejected the assessee's business claims. The Ld. AO took the view that the assessee had not disclosed any business income in the return of income (ROI) filed, and hence, the business transactions claimed during the assessment proceedings were treated as an afterthought. Furthermore, the cash deposit in question was made during the demonetization period.We note that the Ld. AO did not conduct any investigation into the nature of the assessee's business. During the appellate proceedings before the ITAT, the assessee submitted supporting documents, including bills, ledgers, and bank account statements, which are compiled in the paper book (APB pages 48–83). The assessee also contended that the cash deposit during demonetization amounted to Rs.2,83,000/-, not Rs.10,82,000/- as alleged. It was further argued that the assessee is a small businessman who declared business profits exceeding the presumptive profit prescribed under Section 44AD of the Act. The Ld. AO, however, disregarded these submissions and added the entire cash deposit in the bank account to the assessee’s income. After considering the submissions of theLd. AR, we find that the Ld. AO failed to initiate any verification into the assessee's business activities. Although the assessee did not initially Puran K JIN (HUF) declare business income in the ROI, the income was recomputed and declared during the assessment proceedings. Considering the above, we find no justification for sustaining the addition against the assessee. Consequently, the addition of Rs.10,82,000/- is hereby quashed.

In the result, the appeal of the assessee bearing is allowed. Order pronounced in the open court on _____ day of January, 2025.