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Facts
The Revenue appealed against the CIT(A)'s order for AY 2017-18, where the Assessing Officer had initially made an addition of Rs. 1,81,65,408/- under Section 144. The CIT(A) partly allowed the appeal, deleting Rs. 1,44,60,475/- by treating Rs. 1,57,17,928/- of cash deposits as business turnover and applying a presumptive profit rate under Section 44AD. The assessee consistently failed to appear or provide requested documents during assessment and appellate proceedings.
Held
The Tribunal found that the assessee provided no evidence for the cash deposits being business receipts or for filing VAT returns as claimed. It held that the CIT(A) erred in treating the deposits as turnover without material evidence. Consequently, the entire amount of Rs. 1,57,17,908/- should be treated as income from unexplained sources under Section 69A.
Key Issues
Whether cash deposits in the bank account should be treated as business turnover applying Section 44AD or as income from unexplained sources under Section 69A, given the assessee's non-compliance and lack of supporting evidence.
Sections Cited
69A, 44AD, 144
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Income Tax Appellate Tribunal, LUCKNOW BENCH ‘A’, LUCKNOW
Before: SHRI KUL BHARAT & SHRI ANADEE NATH MISSHRA
Revenue pertaining to assessment year 2017-18 against impugned appellate order dated 28/01/2025 (DIN & Order No. ITBA / NFAC / S /250 /2024 -25 / 1072615135(1) passed by learned Commissioner of Income Tax (Appeals) [“CIT(A)” for short]. The grounds raised by Revenue are as under:
“1. The learned CIT(A) has erred in law and on facts of the case in amending the addition of Rs.1,81,65,408/- u/s 69A of the Act by treating other deposits to the tune of Rs.1,57,17,928/- as turnover of the assessee and calculating profit as per section 44AD of the Act on these deposits.
The learned CIT(A) has erred in law and on facts of the case by calculating profit as per section 44AD of the I.T. Act, 1961 on the addition of Rs.1,57,17,928/- without considering (a) The fact that assesses has not filed the return of income for A.Y.2017-18. (b) As per information received from the commercial tax department, the assessee has not filed quarterly/annual VAT return for the A.Y.2017-13. (c) As per the bank statement, there are credit entries for which the assessee has not paid VAT. As per guidelines every assessee who has turnover above Rs.50 lacs has to file VAT returns. Therefore, the genuineness of the business has not been proved.
The Ld. CIT(A) has erred in law and on facts of the case by granting relief to the assessee even though the assessee has not filed any reply or additional documents to prove the genuineness of the business either during the assessment proceedings or at the time of appellate proceedings.”
(B) In this case assessment order dated 16/12/2019 was passed u/s 144 of the Act whereby the assessee’s total income was determined at Rs.1,81,65,408/-. The assessee’s appeal against the assessment order was partly allowed, wherein income of the assessee was determined at Rs.37,04,933/- and the remaining amount of Rs.1,44,60,475/- was deleted. The present appeal has been filed by Revenue against the aforesaid appellate order of learned CIT(A). In the grounds of appeal, the only issue in dispute is an amount of Rs.1,57,17,928/- deposited by the assessee in cash in bank account. The Assessing Officer has treated this amount as income of the assessee but the learned CIT(A) treated this amount as assessee’s turnover in the business of the assessee and determined income on this turnover @8%; whereby the income of the assessee from business was determined at Rs.1,12,57,433/- (i.e. 8% of Rs.1,57,17,908/-). The remaining amount, i.e. Rs.44,60,475/- was deleted by the learned CIT(A).
(C) In the course of appellate proceedings in Income Tax Appellate Tribunal, hearings were fixed on 09/06/2025, 04/08/2025 and 18th September 2025, which were not attended by the assessee or any representative of the assessee. Assistance of Revenue was sought for service of notice for the hearing fixed on 11/11/2025. At the time of hearing, the learned Departmental Representative filed letter dated 10/11/2025 of the Assessing Officer, intimating that the notice of hearing was served on the assessee’s employee Abrar and on the assessee also by Whatsapp on the mobile number of the assessee. The relevant portion of the aforesaid letter dated 10/11/2025 is reproduced below for the ease of reference:
(C.1) Once again there was no representation from the assessee’s side at the time of hearing on 11/11/2025. Earlier, in the aforesaid assessment order, the Assessing Officer has also stated (at page 5 of the assessment order) that the assessee had not made proper compliance to any of the notices issued during assessment proceedings. Further in the aforesaid impugned appellate order of the learned CIT(A) has also stated, in paragraph 5 & 7 that the appellant assessee has not submitted any comments/response to the remand report of the Assessing Officer in connection with additional evidence filed by the assessee. Thus, it is found that the assessee has displayed attitude of non compliance during assessment proceedings, during appellate proceedings before the learned CIT(A), and during appellate proceedings in Income Tax Appellate Tribunal. In view of these facts and circumstances, we heard the appeal despite non attendance from the assessee’s side.
(D) In the absence of any representation from the assessee’s side, we heard learned Departmental Representative and perused the materials on record. The learned Departmental Representative drew our attention to relevant portions of the assessment order and the impugned appellate order of learned CIT(A). In particular, he submitted that the assessee had not filed any valid return of income. He further drew our attention to the fact that the assessee had stated during assessment proceedings ub a letter sent through Speed Post that he was proprietor of Suleman Agencies, which regularly filed quarterly VAT return. However, when the verification was made by the Assessing Officer from VAT authorities, it was intimated by the VAT authorities that no VAT return was filed as claimed by the assessee. He also drew our attention to the remand report submitted by the Assessing Officer to the learned CIT(A), relevant portion of which is reproduced below for the ease of reference:
(D.1) In view of these facts and circumstances, the learned Departmental Representative submitted that the CIT(A) erred in treating the deposits made by the assessee in bank account as assessee’s turnover. He contended that the addition made by the Assessing Officer of the aforesaid amount of Rs.1,57,17,908/- should be sustained entirely.
(E) We have heard learned Departmental Representative. We have also perused materials on record. We find that the assessee has not furnished any document or evidence in any form for the claim that the deposits made by the assessee in bank were the business receipts of the assessee. Further the assessee did not file any valid return of income. Moreover, the assessee’s claim that he had filed quarterly VAT return on regular basis were found to be false when the Assessing Officer made verification with the VAT authorities. Because of these reasons, we are of the opinion that the learned CIT(A) has erred in treating the deposits made by the assessee in bank account as the assessee’s turnover without material evidence for this conclusion. We, accordingly uphold the contention of the learned Departmental Representative that the entire amount of Rs.1,57,17,908/- should be treated as assessee’s income from unexplained sources and should be upheld entirely. Accordingly, the Assessing Officer is directed to include the aforesaid amount of Rs.1,57,17,908/- as assessee’s income in entirety. (F) In the result, the appeal of Revenue is allowed.
(Order pronounced in the open court on 13/11/2025)