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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI V.DURGA RAO & SHRI G.MANJUNATHA
This appeal filed by the assessee is directed against the order passed by the learned CIT(A), Salem dated 20.08.2019 and pertains to assessment year 2010-11.
Brief facts of the case are that in this case information available with the department shows that the assessee has deposited cash exceeding Rs.10 lakhs in savings bank account during the relevant year, but had not filed return of income.
Hence, notice u/s.148 of the Income Tax Act, 1961 was issued calling upon the assessee to file return of income for assessment year 2010-11. Subsequently, the case has been taken for scrutiny and during the course of assessment proceedings, the Assessing Officer noticed that the assessee has deposited Rs.10,44,000/- in savings bank account maintained at Karur Vysya Bank, Mettur Dam Branch, but could not explain source for deposit and hence, cash deposited into bank account has been treated as unexplained cash credit and made addition u/s.68 of the Act.
Being aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT(A). Before learned CIT(A), the assessee has filed revised working for source of cash deposits into Karur Vysya Bank along with statement of Vijaya Bank for relevant period and argued that it has withdrawn cash from Vijaya Bank and deposited the same into Karur Vysya Bank account. During the course of appellate proceedings, the learned CIT(A) forwarded additional evidences filed by the assessee to Assessing Officer for his comments.
The Assessing Officer vide his remand report submitted that although, the assessee claims to have withdrawn cash from Vijaya Bank and deposited into Karur Vysya Bank, but on perusal of explanation furnished by the assessee there is a gap of 3 to 4 months between withdrawal from Vijaya Bank and deposit into Karur Vysya Bank account for which no proper explanation has been offered and hence reiterated his observations during appellate proceedings.
The learned CIT(A), after considering relevant submissions of the assessee and also taken note of remand report issued by the Assessing Officer observed that out of total deposit of Rs.10,44,000/-, the assessee could explained source to the extent of Rs.3,40,000/- and hence, directed the Assessing Officer to delete additions made towards cash deposits into Karur Vysya Bank of Rs.3,40,000/-. Insofar as balance deposit of Rs.2,95,000/- explained out of opening cash balance, the learned CIT(A) has rejected explanation of the assessee that it has opening cash balance in hand to explain source of cash deposits. Similarly, other deposit of Rs.4,09,000/- explained out of available withdrawal from Vijaya Bank was also rejected on the ground that there was gap of 3 to 4 months between withdrawal and deposits. Aggrieved by the learned CIT(A) order, the assessee is in appeal before us.
The learned A.R for the assessee submitted that the learned CIT(A) has erred in sustaining additions made by the Assessing Officer towards cash deposits with Karur Vysya Bank account without appreciating fact that the assessee has sufficient source, as per which he had withdrawn cash from Vijaya Bank and deposited into Karur Vysya Bank account, because Vijaya Bank branch does not have facility of ATM.
The AR further submitted that the assessee has filed cash flow statement explaining source of cash availability on each date of deposits made into Karur Vysya Bank account. Therefore, in absence of any finding from the Assessing Officer that cash withdrawal on earlier occasions was used for some other purposes, available source cannot be ignored while making additions towards cash deposits into bank account.
The learned DR, on the other hand, strongly supported order of the learned CIT(A).
We have heard both the parties, perused material available on record and gone through orders of the authorities below. Admittedly, the assessee was not regularly filing his income tax return for earlier years. However, he has deposited more than Rs.10 lakhs into savings bank account. When the Assessing Officer called upon the assessee to explain source, the assessee has explained source out of opening cash balance, cash withdrawal from Vijaya Bank account on earlier occasions. The Assessing Officer has not accepted explanation furnished by the assessee. However, the learned CIT(A), on examination of various evidences filed by the assessee has accepted source to the extent of Rs.3,40,000/- by holding that the assessee has filed necessary bank statements to prove withdrawal from Vijaya Bank on the same date when cash deposit was made into Karur Vysya Bank. As regards remaining cash balance of Rs.7,04,000/-, the assessee has explained that a sum of Rs.2,95,000/- is out of opening cash balance and remaining Rs.4,09,000/- is out of cash withdrawal from Vijaya Bank on earlier occasions. Insofar as opening cash balance is concerned, since the assessee has not filed his returns for earlier financial years, it is difficult to accept explanation of the assessee that it has declared income to explain cash deposits into bank account. Similarly, as regards remaining cash deposit of Rs.4,09,000/-, although the assessee claims that he has withdrawn from Vijaya Bank account on earlier occasion, but there was categorical finding of the Assessing Officer that there was gap of 3 to 4 months between withdrawal and cash deposits. The assessee could not satisfactorily explain reasons for withdrawal of cash balance from Vijaya Bank and depositing into Karur Vysya Bank after the period of 3 to 4 months. Therefore, explanation of the assessee that it has sufficient cash balance out of withdrawal from Vijaya Bank account cannot be accepted. At the same time, it is an admitted fact that the assessee is into business of civil contract. The assessee claims that during the year it has received contract receipts of Rs.26,09,652/- from M/s.
S.Thartious Engineering Contractors and out of which he has deposited cash into bank account. The explanation of the assessee that cash deposited into bank account is out of contract receipts appears to be bonafide. Therefore, we are of the considered view that the assessee is able to explain cash deposit into bank account out of contract receipts received during the year. But, fact remains that the assessee has not admitted any income for the year under consideration by filing regular return of income declaring contract receipts. Since the source of cash deposited into bank account is out of contract receipts, we are of the considered view that said receipt needs to be considered for the purpose of estimation of income. In contract business, generally there is profit margin of 8 to 10% depending upon contracts. Even, as per the provisions of section 44AD of the Act, the statute has provided for estimation of net profit @ 8% in case of small contractors where they are not maintained regular books of account.
Therefore, considering fact that assessee having received contract receipts and source for cash deposit into bank account out of contract receipts, we are of the considered view that a reasonable profit needs to be estimated on total cash deposits into bank account. Therefore, by taking a clue from section 44AD of the Act, we deem it appropriate to estimate 8% net profit on remaining cash balance Rs.7,04,000/- deposited into Karur Vysya Bank account. Hence, we direct the Assessing Officer to sustain additions to the extent of 8% cash deposits made into bank account and balance should be deleted.