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Facts
The Assessing Officer added a significant amount of cash deposits in the assessee's bank accounts as unexplained income under Section 69A of the Income Tax Act, 1961. The assessee contended that these deposits were part of regular business transactions with both deposits and withdrawals, and no material indicated personal use of withdrawals.
Held
The Tribunal held that the Assessing Officer failed to consider the withdrawals when adding the entire cash deposit as income. Since the assessee's financials were accepted and business income was reported, treating the turnover as unexplained money was not justified.
Key Issues
Whether the entire cash deposits in the bank accounts can be treated as unexplained investment under Section 69A when the assessee has shown business income and regular deposits/withdrawals.
Sections Cited
69A, 148, 142(1), 143(3), 147
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Before: Shri S.S. Viswanethra Ravi & Shri S.R. Raghunatha
O R D E R
PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER:
This appeal filed by the Revenue is directed against the order dated 08.04.2024 passed by the ld. Commissioner of Income Tax (Appeals), Chennai – 19, Chennai for the assessment year 2011-12.
The Appellant-Revenue raised Ground No. 1 to 2.3, amongst which, the only issue emanates for our consideration as to whether the ld. CIT(A) is justified in deleting the addition made by the Assessing Officer under section 69A of the Income Tax Act, 1961 [“Act” in short].
At the outset, we note that the assessee is an individual, conduct his business under the name & stile of M/s. Jayabharath Housing Private Limited. The assessee filed return of income declaring total income of ₹.7,72,241/-. According to the Assessing Officer, on an information regarding cash deposits aggregating to ₹.1,98,72,352/- in ICICI Bank and ₹.93,43,965/- in his Axis Bank account was received from the DDIT, Madurai and accordingly, notice under section 148 of the Act issued. In response to the said notice, the assessee filed return of income, declaring total income of ₹.31,51,430/-. The assessee filed reply dated 26.12.2018 in response to the notice under section 142(1) of the Act. On an examination of the same, the Assessing Officer observed that the assessee failed to produce the clients for whom the contract work was carried out and thereby, added an amount of ₹.2,92,16,317/- [₹.1,98,72,352 + ₹.93,43,965] as total income of the assessee under section 69A of the Act vide his order dated 28.12.2018 under section 143(3) r.w.s. 147 of the Act.
Having not satisfied with the assessment order, the assessee challenged the same before the ld. CIT(A). Before the ld. CIT(A), the assessee contended that the entire amount cannot be taxed legally as there are regular deposits and withdrawals both by way of cheque and cash. Further, it was contended that no material was found regarding use of withdrawals for assessee’s personal expenses or for any investments. Having considered the same, the ld. CIT(A) deleted the addition by holding that the Assessing Officer has no evidence on record showing the entire bank deposits are the income of the assessee. Having aggrieved by the order of the ld. CIT(A), the Revenue is in appeal before us for raising the above said ground.
The ld. DR Dr. M.D. Vijay Kumar, JCIT relied on the order of the Assessing Officer. The ld. DR submits that there was no explanation offered by the assessee regarding the alleged contract receipts. The Assessing Officer asked the assessee to produce the persons to whom the professional work has been carried out, but, the assessee failed to produce any person before the Assessing Officer during the course of assessment proceedings. The Assessing Officer correctly added the said amount in the absence of any explanation offered by the assessee.
The ld. AR Shri R. Venkata Raman, C.A. supported the order of the ld. CIT(A).
Heard both the parties and perused the material available on record. As rightly pointed out by the ld. CIT(A) in the impugned order that there is no benefit given to the withdrawals and no verification has been done in that regard whether the said withdrawals were utilized for personal benefit of the assessee. The Assessing Officer failed to conduct an examination in this regard to arrive at correct income of the assessee. The Assessing Officer, however, proceeded to add entire cash deposit as income of the assessee, without there being any benefit to the withdrawals, in our opinion, is not justified. We find the assessee filed original return of income declaring a total income of ₹.7,72,241/- and in response to the notice under section 148 of the Act, declared income of ₹.31,51,430/-. The break-up of the said income is reflected in page 15 of the impugned order. On examination of the same, the assessee stated to have been earned income from salary, income from other sources and income from business. The ld. CIT(A) discussed all the issues in detail and for ready reference, we deem it proper to reproduce relevant part as under: 6.8.12 The Appellant in the submission made before the undersigned has claimed that the entire cash deposit made cannot be taxed in his hands. The relevant submission of the Appellant is reproduced as under "even if cash deposits are considered as belonging to the assessee. the entire amount cannot be taxed legally as there are regular deposits and withdrawals both by way of cheque and cash and no material has been found during the assessment proceedings that the withdrawal has been used by the assessee for any personal expense or for any investment. It means that the money withdrawn was regularly routed through the bank account." 6.8.13 The Appellant further contended that the provisions of section 69A of the Act will not apply to the Appellant's case as the assessee is not the owner of the money being the entire cash deposit in the Bank Account. The relevant
portion of the submission of the Appellant upon this issue is reproduced as under: "The learned assessing officer ought to have seen that section 60A is not applicable to the facts of the case as the assessee is not the owner of the money being the entire cash deposits in the bank account and in the light of the decision of the Honorable Supreme Court decision in the case of Smt. P K. Noorjahan (237 ITR 570) and should have assessed only the profit and not the turnover." 6.8.14 The undersigned has carefully examined the issue under consideration. The Appellant in the original Return of Income filed has claimed only salary income and income from other sources being the interest income upon fixed deposits. The ADI (Inv.) had an information about the cash deposit made by the Appellant in ICICI and AXIS Bank, Madurai Branch. In the statement recorded the ADI (Inv.), the Appellant had admitted that no proper books of accounts were maintained and the income was arrived on estimated basis by adopting cash deposits as total contract receipts for the year. The A.O. on the basis of the Report of the ADI (Inv.) has initiated proceedings u/s 147 of the Act and completed the assessment by adding the entire cash deposit as unexplained investment in the hands of the appellant as per the provisions of the section 69A of the Act. 6.8.15 Now the issue before the undersigned is whether the cash deposits made by the Appellant in the Bank Accounts can constitute the unexplained investment of the Appellant or not. The Appellant during the course of Appellate Proceedings has made available the relevant Bank Statement before the undersigned, which was very well available before the A.O. during the course of Assessment Proceedings. While examining the Bank Accounts, it can be seen that there exists both cash deposit as well as withdrawal by way of cash and by means of cheque. The AO had an occasion to consider the only the cash deposit but omitted to consider the withdrawals as reflected in the Bank Statement. 6.8.16 The Appellant has relied upon the decision of the Hon’ble Apex Court in the case of the P.K. Noorjahan as reported in 237 ITR 570, wherein it has been held that “The Income-tax Appellate Tribunal (hereinafter referred to as The Tribune) however, held that even though the explanation about the nature and sources of the purchase money was not satisfactory but in the facts and circumstances of the case it was not possible for the assesses to earn the amount invested in the properties and that by the stretch of imagination could the assessee by credited with having earned this income in the course of the assessment year or was ever in a position to earn it for a decade or more.”
6.8.17 The A.O. being a Quasi Judicial Authority must be fair enough in arriving any conclusion in accordance with the principals of natural justice. The AO has taken into account only the deposit made by the Appellant and conveniently omitted to consider the relevant withdrawals. There exists no evidence to treat the entire cash deposit made by the Appellant as his income. When the withdrawals are considered the closing balance is nearly minimum. Obviously, this established the fact that the Appellant is performing some kind of work relating to his business. Naturally, in such circumstances the profit attributable to such business can alone be taxed as income of the Appellant. As pointed by the Apex Court even though the explanation about the nature and sources of the cash deposit made was not satisfactory but in the facts and circumstances of the case it was not possible for the assessee to earn the amount of the cash deposit made as his income. 6.8.18 The Appellant was able to prepare books of accounts and the net profit determined as per the financials is Rs.31,51,433/-, The breakup of this amount is as under: Income from Salary Rs.1,60,000/- Income from Other Sources Rs.5,20,323/- Income from Business Rs.23,71,111/- Total Rs.31,51,434/-
6.8.19 The A.O in the Assessment Order passed, has accepted the above amount in computing the total income of the Appellant. From the order of the A.O., it can be stated that the A.O. has accepted the financials reported in the Return of Income Having accepted the financials of the Appellant and considered the business income reported, there can be no case to treat the Turn-Over (Cash Deposit) as unexplained money as per the provisions of section 69A of the Act. In view of this, the undersigned is of the considered view that the action of the A.O, in treating the entire cash deposit as unexplained in the hands of the Appellant lacks merit. Accordingly, all the grounds raised by the Appellant upon this issue are hereby treated as allowed and the A.O. is hereby directed to delete the addition of Rs.2,92,16,317/- as unexplained as per the provisions of section 69A of the Act, for the A.Y. 2011-12.
8. On examination of the same, we find that the ld. CIT(A) was of the opinion that there was no evidence brought on record by the Assessing Officer to bring entire cash deposits as income of the assessee chargeable to tax. In view of the same, we find no infirmity in the order of the ld. CIT(A) and it is justified. Thus, the grounds raised by the Appellant-Revenue are dismissed.
In the result, the appeal filed by the Revenue is dismissed. Order pronounced on 12th March, 2025 at Chennai.