SHRI GAURANGBHAI V. SOJITRA (HUF),,SURAT vs. THE INCOME TAX OFFICER, WARD-6(2),, SURAT

आदेश /O R D E R

PER O. P. MEENA, ACCOUTANT MEMBER:

Shri Gaurangbhai V. Sojitra (HUF) v. ITO, Ward 6(2), Surat/I.T.A. No.1865/Ahd/2015/A.Y.:11-12 Page 2 of 9 Act,1961 (in short ‘the Act’) by the Income Tax Officer, Ward-6(2) Surat (in short “the AO”). 2. Ground No.1 states that the ld.CIT(A) has erred in

confirming the action of Assessing Officer in treating income of

Rs.2,13,700/- shown in the Return of income as income from

other source. Ground No.2 is against the confirmation of

addition of Rs.15,00,271/- as unexplained cash deposit in the

bank account. Ground No.3 relates to not giving set off of

Rs.2,13,700/- shown in the Return of income while making the

above addition as unexplained cash deposit in the bank account.

hence same are being considered together.

Return of income declaring total income at Rs.2,13,700/- u/s.44AD

on total sales of Rs.7,42,213/-. The Return income of

Rs.2,13,700/- also included income of Rs.65,257/- shown as

income from other source. During course of assessment, the AO

noticed that the assessee has deposited cash amounting to

Shri Gaurangbhai V. Sojitra (HUF) v. ITO, Ward 6(2), Surat/I.T.A. No.1865/Ahd/2015/A.Y.:11-12 Page 3 of 9

Rs.16,06,700/- in the savings bank account with Bank of India. It

was claimed that the source of cash deposit is out of cash sales

and the assessee has been filing his Return as per the provisions of

section 44AD. A cash book evidencing the cash sales was also filed,

however, the same was not considered to be genuine by the AO.

Therefore, the AO considered the total cash deposits of

Rs.16,06,700/- as unexplained u/s.68 of the Act. However, the AO

noted in the interest of natural justice an amount of Rs.1,06,429/-

shown by the assessee in his Return of income was considered as

opening cash balance instead of Rs.6,90,734/- claimed by the

assessee. Therefore, the net addition of Rs.15,00,271/- was made

to the total income of the assessee.

ld.CIT(A), wherein, it was claimed that cash deposits of

Rs.16,06,700/- is out of opening cash balance of Rs.6,90,734/-,

cash received from debtors at Rs.1,79,920/-, and cash sales of

Rs.7,42,213/- which has been shown in the Return of income and

Shri Gaurangbhai V. Sojitra (HUF) v. ITO, Ward 6(2), Surat/I.T.A. No.1865/Ahd/2015/A.Y.:11-12 Page 4 of 9

unsecured loan from relatives at Rs.45,000/-. Without prejudice,

it was also claimed that the addition if any can be made only to

the extent of peak credit balance of Rs.3,51,042/- appearing on

27.12.2010 in the bank account. However, the CIT(A) observed

that the whole transaction was shown as make believe and no

genuine business activity was carried out by the assessee,

therefore, CIT(A) was of the view that explanation regarding cash

deposits in the bank account is not substantiated with the proper

evidence. It was further observed that since the source of income

of Rs.15,00,271/- is totally different and addition is made

unexplained cash deposits, therefore set off of income of

Rs.2,13,700/- cannot be allowed. Accordinlgy the appeal of the

assessee was came to be dismissed.

Tribunal. The ld.Counsel for the assessee contended that the

assessee is engaged in the business of retail trading in sarees and

has filed his Return of income under the presumptive provisions of

Shri Gaurangbhai V. Sojitra (HUF) v. ITO, Ward 6(2), Surat/I.T.A. No.1865/Ahd/2015/A.Y.:11-12 Page 5 of 9

section 44AD of the Act in the form no ITR-4S for the year under

consideration. Similarly, Return of income for preceding year i.e.

A.Y. 2010-11 was also filed under the provisions of section 44AF.

The assessee has also produced copy of the purchase and sales and

confirmation statement from debtors. The assessee has shown

turnover of Rs.7.42 lakhs for the year under consideration and

therefore, cash deposits corresponding to this sales made during

the year is required to be set off from the total cash deposits of

Rs.16,06,700/- made during the year and the estimation of income

should be made only on the balance amount remaining after set

off of Rs.1,48,443/- disclosed on total turn over of Rs.7,42,213/-

in the Return of income. It was also contended that E-return filed

by the assessee shows gross receipts of Rs.20.08 lakhs in column

51 of the A.Y. 2010-11. Therefore, the AO should have accepted

the opening balance claimed by the assessee. In view of these

facts, it was claimed that the total turnover of the assessee may

be considered as total cash deposits made during the year at

Shri Gaurangbhai V. Sojitra (HUF) v. ITO, Ward 6(2), Surat/I.T.A. No.1865/Ahd/2015/A.Y.:11-12 Page 6 of 9 Rs.16,06,700/- on which net profit may be estimated as per

provisions of section 44AD of the Act.

contended that the assessee has shown total turnover of Rs.7.42

lakhs in the Return of income, whereas cash deposits amounting

to Rs.16.06 lakhs made in the bank account are not related with

the sales as claimed by the assessee. Therefore, the same cannot

be considered as part of turnover as claimed by the ld.Counsel for

the assessee.

record. We find that the assessee has shown total turnover of

Rs.7,42,213/- for the year under consideration and therefore the

claim that cash deposit corresponding to this sale should be set off

from total deposits of Rs.16,06,700/- made during the year is not

found convincing. Further set off of Rs.1,77,920/- and Rs.45,00/-

on account of amount from debtors and unsecured loan from

relatives respectively should be given only if the estimation of

Shri Gaurangbhai V. Sojitra (HUF) v. ITO, Ward 6(2), Surat/I.T.A. No.1865/Ahd/2015/A.Y.:11-12 Page 7 of 9

income have been made only on the balance amount. Therefore,

the claim that cash deposit of Rs.6,39,567/- should be considered

and for set off against opening cash balance available with the

assessee and after allowing set off of Rs.1,06,429/-, the balance

figure comes to Rs.5,33,138/- only and this amount the profit

should have been estimated by the AO. However, we find that the

assessee has shown cash sales amounting Rs.7.42 lakhs only for

which bills have been produced during the course of assessment

proceedings which are appearing at page 9 and 10 of the

assessment order. Therefore, we are not persuaded with the

contention of the ld.Counsel that the set off of Rs.7.42 lakhs being

cash sales should be given against the cash deposits of Rs.16.06

lakhs. It is further noticed from the pattern of cash deposits, as

reflected in the bank account of the assessee, which are made

during the month of December 2010 and January 2011 only.

Therefore, it cannot be said that these cash deposits are

representing unaccounted cash sales of the assessee. Further, the

Shri Gaurangbhai V. Sojitra (HUF) v. ITO, Ward 6(2), Surat/I.T.A. No.1865/Ahd/2015/A.Y.:11-12 Page 8 of 9

AO has also pointed out that these deposits are not related to cash

sales as the bills produced were not matching with reference to

sales bills. Therefore, this contention of the assessee is not found

to be accepted. However, considering the totality of facts and

taking a harmonious construction and considering the fact that the

assessee has filed Return of income under the provision of section

44AD. Therefore, it would be reasonable to restrict the addition

of cash deposit to the extent of peak credit balance of

Rs.3,51,042/- as appearing on 23.12.2010 in the bank account. In

the light of these facts, the addition made on account of cash

deposits at Rs.15,00,271/- is restricted to Rs.3,51,042/-.

Accordingly, ground no.2 of the appeal is partly allowed.

is concerned, we are of the view that this cannot be allowed as

the deposits are not found to be linked with the sale proceeds of

the assessee. However, it is true that the income of Rs.1,48,843/-

has been shown @ 20% of total turnover of Rs.7,42,213/- the same

Shri Gaurangbhai V. Sojitra (HUF) v. ITO, Ward 6(2), Surat/I.T.A. No.1865/Ahd/2015/A.Y.:11-12 Page 9 of 9

relates to business transaction, therefore, AO is directed to treat

the said income as income from business instead of income from

other source treated by the AO at Rs.2,13,700/-. In view of these,

the ground no.1 is allowed. However, the question of set off of

Rs.2,13,700/- as per ground no.3 of appeal, we find that the same

cannot be allowed as the same represent business income of

Rs.1,48,443/- and Rs.65,257/- being interest income on bank

deposits under other source. Therefore, ground no.3 of appeal is

dismissed.

Sd/- Sd/- (सी.एम.गग� /C.M. GARG) (ओ.पी.मीना/O.P.MEENA) �याियकसद�यतथा/JUDICIAL MEMBER लेखासद�यकेसम� /ACCOUNTANT MEMBER सुरत/ Surat, �दनांक Dated: 12th July, 2018 Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/Guard file of ITAT. By order / / TRUE COPY / / Assistant Registrar, Surat