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Facts
The assessee, an individual, failed to file his Income Tax Return for A.Y. 2016-17. The case was reopened u/s 147 due to a cash deposit of Rs. 25,19,900/- in his bank account. Despite claiming the deposit was from his business of trading in stones, the assessee could not provide supporting evidence, leading the Assessing Officer to add the amount as unexplained cash credit u/s 68. The CIT(A) dismissed the assessee's appeal due to non-compliance.
Held
The Tribunal upheld the addition of Rs. 25,19,900/- as unexplained cash credit under Section 68 due to the assessee's failure to substantiate the source. However, it directed the Assessing Officer to grant relief for the separate addition of Rs. 4,53,980/- representing declared net profit, as this amount was deemed subsumed within the larger addition of total cash credits.
Key Issues
Whether the cash deposit in the bank account was an unexplained cash credit under Section 68 due to lack of evidence, and whether a separate addition for declared net profit was justified when a larger sum was already added as unexplained cash credit.
Sections Cited
147, 148, 142(1), 68, 144, 144B
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Income Tax Appellate Tribunal, HYDERABAD “B” BENCH : HYDERABAD
Before: SHRI MANJUNATHA G & SHRI RAVISH SOOD
1 ITA.No.1405/Hyd./2024 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD “B” BENCH : HYDERABAD BEFORE SHRI MANJUNATHA G, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA.No.1405/Hyd/2024 Assessment Year 2016-2017 Syed Zubair Pasha, The Income Tax Officer, vs. VIKARABAD – 501 141. Ward-1, PAN BOWPS3830M VIKARABAD. (Appellant) (Respondent) For Assessee : Shri Sashank Dundu, Advocate For Revenue : Dr. Sachin Kumar, Sr AR Date of Hearing : 12.03.2025 Date of Pronouncement : 18.03.2025 ORDER PER MANJUNATHA G, A.M. :
This appeal has been filed by the Assessee against the Order dated 07.10.2024, of the learned CIT(A)-National Faceless Appeal Centre [in short “NFAC”], Delhi, relating to the assessment year 2016-2017.
Facts of the case, in brief, are that the assessee is an individual and had not filed his return of income for the year under consideration i.e., A.Y. 2016-2017. The case of 2 ITA.No.1405/Hyd./2024 the assessee was reopened u/sec.147 of the Income Tax Act, 1961 [in short “the Act”] on the basis of information received from the ITO, Investigation Wing-1, Hyderabad and as per the said information, the assessee has deposited cash to the extent of Rs.25,19,900/- to his bank account. Therefore, the Assessing Officer issued notice u/sec.148 of the Act dated 29.03.2021 and served on the assessee. In response to the said notice, the assessee did not file his return of income. Thereafter, notice u/sec.142(1) of the Act dated 11.11.2021, 18.02..2022, 28.01.2022 and 04.03.2022 were issued to the assessee. However, the assessee has failed to comply with the above said notices. Therefore, the Assessing Officer on the basis of the information available on record, issued final show cause notice dated 21.03.2022 and called upon the assessee to furnish relevant evidences on or before 23.03.2022. In response to the notice, the assessee vide letter dated 22.03.2022 filed certain information including relevant bank statement, computation of total income and claimed that he is into the business of trading in Stones and source for cash deposit is out of his business receipts. The 3 ITA.No.1405/Hyd./2024 Assessing Officer after considering the submissions of the assessee and also taken note of all relevant facts, observed that the assessee could not establish the source for cash deposit into bank account from known source of income. Further, although, the assessee has claimed that source for cash deposit is out of business receipts, but, the assessee could not filed any evidence to substantiate his claim nor filed return of income to prove that profit declared from the business is supported by cogent evidence. Therefore, the explanation of the assessee has been rejected by the Assessing Officer and made addition of Rs.25,19,900/- as unexplained cash credit u/sec.68 of the Act and determined the total income of the assessee at Rs.29,73,880/- as against the returned income of Rs.4,53,980/- vide order dated 31.03.2022 passed u/sec.147 r.w.s.144 r.w.s.144B of the Income Tax Act, 1961.
Being aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT(A). Before the learned CIT(A), the assessee could not appear nor filed any details which is evident from para 4.1 of his order
4 ITA.No.1405/Hyd./2024 where the case was taken-up for hearing on four occasions, but, no response from the assessee. Therefore, the learned CIT(A) disposed of the appeal filed by the assessee on the basis of material available on record and dismissed the appeal filed by the assessee on adhoc additions made by the Assessing Officer towards cash deposited into bank account u/sec.68 of the Act.
Aggrieved by the order of the learned CIT(A), the assessee is now in appeal before the Tribunal.
Shri Sashank Dundu, Learned Counsel for the Assessee, referring to the affidavit of the appellant dated 11.03.2025 submitted that the Consultant who handled the tax matters of the assessee has given his email ID for all communications. However, the Assessing Officer did not consider the submissions and passed the order dated 31.03.2022 without considering various evidences filed by the assessee. Further, before the learned CIT(A), the assessee could not respond due to difference between his Tax Consultant. Otherwise, the assessee has filed all
5 ITA.No.1405/Hyd./2024 evidences to justify the source for cash deposit. Learned Counsel for the Assessee further referring to assessment order passed by the Assessing Officer for the assessment year 2018-2019 submitted that where the Assessing Officer has accepted the trading results declared by the assessee from his business of trading in Stones. Therefore, he submitted that unless there is change in facts, the Assessing Officer cannot take a different view. Although, the assessee has brought-out clear facts, the Assessing Officer and the learned CIT(A) sustained the additions towards cash deposited as unexplained cash credit. Therefore, he submitted that the addition made by the Assessing Officer should be deleted.
The Learned Sr. AR Dr. Sachin Kumar, on the other hand, supporting the order of the learned CIT(A) submitted that the assessee neither justified the trading receipts from his business by filing relevant evidences nor filed any return of income to justify profit declared from the business. In absence of any evidence, the Assessing Officer has made the impugned addition towards cash deposit as 6 ITA.No.1405/Hyd./2024 unexplained cash credit. The learned CIT(A) after considering all the relevant facts has rightly sustained addition made by the Assessing Officer and the order of the learned CIT(A) should be upheld.
We have heard both the parties, perused the material on record and gone through the orders of the authorities below. We have also gone through the relevant evidences filed by the assessee including computation of total income along with financial statements for the year under consideration. Upon careful consideration of the relevant information filed by the assessee, we find that the assessee has simply filed statement of total income along with financial statements without any supporting evidences to justify the profit declared for the year under consideration. Further, the assessee has not filed any return of income in support of his financial results. From the details filed by the assessee, it appears that assessee has filed certain evidences to explain the source for cash deposited into bank account, but, the fact remains that the evidences filed by the assessee does not prove the claim of 7 ITA.No.1405/Hyd./2024 the assessee that he is into the business of trading in Stones. In absence of any evidence to prove business activity, the financial results declared by the assessee, cannot be accepted to this extent, we cannot find fault with the learned Assessing Officer and learned CIT(A). However, the fact remains that the Assessing Officer has made additions of Rs.4,53,980/- towards profit declared by the assessee on the basis of statement of total income and further, made an addition of Rs.25,19,000/- towards unexplained cash credit deposited into bank account. Once the addition is made towards total credits in bank account, in our considered view, the Assessing Officer ought to have given credit for the profit declared by the assessee for Rs.4,53,980/- out of his business receipts. Since the Assessing Officer has made additions towards net profit as per statement of total income and also made additions towards total cash credits, in our considered view, the additions made by the Assessing Officer towards net profit as per statement of income cannot be sustained because such addition is subsumed in the addition made towards
8 ITA.No.1405/Hyd./2024 cash deposit into bank account. The learned CIT(A) without considering the relevant facts, simply sustained the addition made by the Assessing Officer. Thus, we direct the Assessing Officer to allow relief to the assessee to the extent of Rs.4,53,980/- towards net profit declared in the statement of total income and sustain balance addition of Rs.25,19,900/- towards cash deposit into bank account.
In the result, appeal of the Assessee is partly allowed.
Order pronounced in the open Court on 18.03.2025.