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Facts
The assessee, engaged in the business of selling food grains, made cash deposits of Rs. 11,52,000/- in his bank account. No return of income was filed for the assessment year 2011-12. The case was reopened, and the Assessing Officer treated the cash deposits as unexplained investment under Section 69 and made an addition. The Commissioner of Income Tax (Appeals) upheld the addition.
Held
The Tribunal found that the assessee's turnover was similar to the subsequent year where income offered at 8% under Section 44AD was accepted. Therefore, it was held that for the impugned assessment year, the income should also be computed under the presumptive scheme at 8%.
Key Issues
Whether the cash deposits in the bank account can be treated as unexplained investment under Section 69 when the assessee is engaged in a cash-based business and has offered income under presumptive taxation in subsequent years?
Sections Cited
148, 147, 144, 69, 44AD, 115BBE
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Income Tax Appellate Tribunal, ‘D’ BENCH, CHENNAI
Before: SHRI GEORGE GEORGE K, HON’BLE & SHRI S.R. RAGHUNATHA, HON’BLE
PER S. R. RAGHUNATHA, ACCOUNTANT MEMBER:
1. This appeal by the assessee is filed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 05.11.2024 for the A.Y. 2011-12.
2. The assessee has raised the following grounds of appeal:-
For that the order of the National Faceless Appeal Centre is contrary to law, facts and circumstances of the case and at any rate against the principles of equity, natural justice and fair play.
For that the National Faceless Appeal Centre failed to appreciate that the order of the Assessing Officer is without jurisdiction.
:-2-: ITA. No:312/Chny/2025 3. For that the National Faceless Appeal Centre failed to appreciate that the reopening is bad in law and hence the consequent reassessment is also bad in law.
4. For National Faceless Appeal Centre failed to appreciate that the reopening of the assessment is time barred and hence the reassessment is bad in law.
5. For National Faceless Appeal Centre failed to appreciate that there is no reason to believe for the Assessing Officer to reopen the assessment and hence the reassessment are bad in law.
For National Faceless Appeal Centre failed to appreciate that the reasons recorded are bad in law and consequently the reopening and reassessment are bad in law.
7. For National Faceless Appeal Centre failed to appreciate that there is sanction from the specified authority in respect of the reopening and hence the consequent reopening and reassessment is bad in law.
8. For that the National Faceless Appeal Centre has erred in sustaining the additions made to the tune of Rs. 1 1,52,000/- given the fact that the appellant had been carrying on business as food grains merchant.
For that the National Faceless Appeal Centre failed to appreciate that the cash deposits in the bank account is nothing but sale proceeds from the sale of food grains.
For that the National Faceless Appeal Centre failed to appreciate that the Assessing Officer passed the order without appreciating the nature of the appellant's business (sale of food grains in his street after purchasing from agriculturists, as a sole proprietor).
For that the National Faceless Appeal Centre failed to appreciate that the Assessing Officer erred in adding the entire turnover of the appellant as his income, instead of 8% of the total turnover on presumptive basis, which works out to Rs.92,160/- and this is well below the taxable limit and offered in the return of income.
For that the Commissioner of Income Tax (Appeals) erred in confirming the addition of the cash deposits made by the appellant as unexplained investment u/s.69. The cash deposits are appellant's business receipts through sales made to his customers.
For that the Commissioner of Income Tax (Appeals) failed to appreciate that the provisions of section 69 cannot be invoked in the facts and circumstances of the case.
For that the Commissioner of Income Tax (Appeals) failed to appreciate that merely because cash is deposited into the bank account of the appellant, it cannot be added as unexplained investment u/s.69. The bank statement cannot constitute as appellant's books.
:-3-: ITA. No:312/Chny/2025 15. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the Assessing Officer did not bring out any material to state that the cash deposits made by the appellant should be brought u/s.69 as unexplained investment.
For that the Commissioner of Income Tax (Appeals) failed to appreciate that the business of the appellant would require cash balances to be kept at all times and consequently cash to be deposited on the sales made.
For that the Commissioner of Income Tax (Appeals) failed to appreciate that the provisions of section 115BBE cannot be invoked in the facts and circumstances of the case.
The above grounds are taken without prejudice to one another. For these grounds and such other grounds that may be urged before or during the hearing of the appeal it is most humbly prayed that the Hon’ble Income Tax Appellate Tribunal may be pleased to (a) Delete the addition to the tune of Rs.11,52,000/- (b) Pass such other orders as this Hon’ble Income Tax Appellate Tribunal may deem fit.
The brief facts of the case are that the assessee has made cash deposits to the tune of Rs.11,52,000/-, in his bank account, ICICI Bank, Panruti Branch. However, no return of income was filed by the assessee. Hence, the case was reopened by way of a notice u/s.148 dated 26.03.2018. Since the assessee did not respond to the notices issued by the Assessing Officer, the assessment was completed u/s.144 r.w.s. 147 by treating the said cash deposit of Rs.11,52,000/- as unexplained investment u/s.69 and the assessment order was passed on 10.12.2018 by raising a demand of Rs.5,75,670/-.
:-4-: ITA. No:312/Chny/2025 3.1 Aggrieved by the assessment order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals). Before the first appellate authority, the assessee contended that he is in the business of sale of food grains as a street vendor, procuring food grains from the farmers and that the cash deposits represent the sales made by him. The assessee further contended that he is not maintaining any books of accounts and that if presumptive taxation u/s.44AD is adopted, the assessee’s income would be Rs.92,160/-, which is 8% of Rs.11,52,000/- which does not warrant him to file return of income. The assessee further contended that he is uneducated and he is not aware of income tax provisions, since he is an agriculturalist. The assessee prayed that the addition may be deleted. The Commissioner of Income Tax (Appeals) dismissed the appeal by holding that the appellant did not substantiate his contentions by passing an order dated 05.11.2024.
Aggrieved by the order passed by the Commissioner of Income Tax (Appeals), the assessee is in appeal before us.
The Ld. AR for the assessee contends that that the addition made by the Assessing Officer is erroneous. The plea taken before the first appellate authority is reiterated. Further, the Ld. counsel for the assessee argued that the Assessing Officer, for the Assessment
:-5-: ITA. No:312/Chny/2025 Year 2012-13, i.e., the next assessment year, accepted the income computed under the presumptive taxation u/s.44AD at 8% and since the department had accepted the stand of the assessee, prayed that the appeal be allowed. In support of the assessee’s argument, the Ld. AR filed a paper book consisting of the return of income, computation of income and assessment order for the next assessment year, i.e., 2012-13.
6. The Ld. DR vehemently opposed the argument of the assessee and prayed that the order of the Commissioner of Income Tax (Appeals) be upheld.
We have heard both the parties perused the available records and gone through the orders of lower authorities. We find that the assessee has not filed return of income for the assessment year under challenge. However, the assessee claims that, based on presumptive taxation u/s.44AD, there is no taxable income. We find that for the next assessment year also, after the receipt of notice u/s.148, the assessee had offered income under the presumptive scheme at 8% u/s.44AD and the income was below the basic exemption limit for taxation. The Assessing Officer had completed the assessment and accepted the returned income, thereby effectively accepting the margin of 8% claimed u/s.44AD by the :-6-: ITA. No:312/Chny/2025 assessee. We further find that the turnover offered for the impugned assessment year as well as the next assessment year is similar, with a marginal increase for the next assessment year. Also, the turnover claimed by the assessee was never questioned by the Assessing Officer for both the assessment years. Since the Assessing Officer had the opportunity to scrutinise the case for the next assessment year and had also accepted the income offered at 8% as per section 44AD, under presumptive scheme, we find force in the arguments of the assessee that for the impugned assessment year also, there will not be any taxable income to be offered for tax. Therefore, in the peculiar facts and circumstances of the case, we are inclined to set aside the order of the ld.CIT(A) and direct the Assessing Officer to delete the addition made u/s.69 to the tune of Rs.11,52,000/- and to recompute the income of the assessee @ 8% of Rs.11,52,000/- u/s.44AD of the Act.
In the result, the appeal of the assessee is allowed.