SRIDEVI RAVI,CHENNAI vs. ITO NON CORPORATE WARD 14(2), CHENNAI

आदेश / O R D E R PER BENCH: These three appeals filed by the assessee are directed

against separate, but identical order of the learned CIT(Appeals)-

14, Chennai all dated 25.07.2018 and pertain to assessment years

2009-10 to 2011-12. Since, the facts are identical and issues are

common, for the sake of convenience, they were clubbed, heard

together and disposed of by way of this consolidated order.

appeal for all the assessment years, therefore, for the sake of

brevity, grounds of appeal filed for the assessment year 2010-11 in

ITA No.2017/Chny/2018 are reproduced as under:-

2 ITA Nos. 2716 to 2718/Chny/2018 “1. For that the order of the Learned Commissioner of Income Tax (Appeals) is contrary to law, facts, and circumstances of the case. 2. For that the Learned Commissioner of Income Tax (Appeals) having accepted that the appellant is engaged in civil works contract and the income derived from the said business is taxable @ 8% u/s 44AD of the Income- tax Act, 1961, erred in directing the Assessing Officer to include peak credit on the total deposits in the appellant’s bank account amounting to ` 20,56,013/-in computing the assessed income.”

deriving income from salary, income from house property and

income from other sources filed her return of income for the

assessment year 2010-11 on 11.10.2010 declaring total income of `14,03,558/-. The assessment has been, subsequently reopened

u/s.147 of the Income Tax Act, 1961 (hereinafter referred to as “the

Act”) for the reasons recorded, as per which income chargeable to

tax had been escaped assessment on account of non-disclosure

of certain savings bank account maintained with Bank of India,

West Mambalam branch, and accordingly, notice u/s.148 dated

30.03.2015 was served on the assessee. In response to the notice,

the assessee vide her letter dated 26.08.2015 stated that return

originally filed on 11.10.2010 may be treated as return filed in

response to notice issued u/s.148 of the Act. Simultaneously, the

assessee also sought for reasons recorded for reopening of

3 ITA Nos. 2716 to 2718/Chny/2018 assessment and the same was furnished. Thereafter, the case has been selected for scrutiny and notices u/s.143(2) and 142(1) along with questionnaire were issued vide office letter dated 28.01.2015. In response, Authorized Representative appeared from time to time and filed various details called for.

the source of income for cash deposits. The assessee vide letter dated 06.10.2015 has filed various details including cash flow statement and submitted that cash deposits found in her bank account was explained and source of such cash deposits were out of business receipts from civil contract work, interior decorations and has also an amount of ` 25.00 lakhs, being amount received from

parties on cancellation of sale agreement. The Assessing Officer after taking note of various details filed by the assessee has accepted the assessee’s explanation with regard to cash deposit of ` 25.00 lakhs out of advance received from certain parties for

4 ITA Nos. 2716 to 2718/Chny/2018 cancellation of agreement. However, in respect of remaining cash deposits of ` 81,20,460/-, the Assessing Officer was of the opinion

that although the assessee claimed to have been explained cash deposits found in bank account as business receipts, but the said cash deposit receipts were not offered to tax, accordingly worked out peak credit of cash deposits in the bank account of `

21,16,013/- on 03.12.2010 and the same has been brought to tax as unexplained investments u/s.69 of the Act. Further out of total cash deposit of ` 81,20,460/- after allowing peak credit of `21,16,013/-, balance amount has been treated as receipts from

business and has estimated 8% net profit under section 44AD of the Act and made addition of ` 6,49,637/-.

5 ITA Nos. 2716 to 2718/Chny/2018 peak credit on the ground that assessee has failed to explain source

of income for cash deposits. The Assessing Officer also made

further addition towards 8% profit on balance cash deposits found in

her bank account under the provisions of Section 44AD of the Act,

even though the assessee explained source for cash deposits. He

further argued that once the Assessing Officer himself had

admitted the fact that assessee has received cash from her civil

contract business and has estimated profit from said business by

applying presumptive taxation rate applicable u/s.44AD of the Act,

he ought to have considered total cash deposits found in her bank

account as receipts from business and has estimated the profit of

8%. During the course of appellate proceedings, the learned CIT(A)

has forwarded additional evidences to the Assessing Officer for his

comments . In response, the Assessing Officer filed a remand report

dated 13.10.2017 and commented upon the admissibility of

additional evidences filed by the assessee under Rule 46A and also

commented upon veracity of additional evidences filed in light of

cash deposits found in her bank account.

and also taken note of various evidences filed by the assessee

has admitted the additional evidences on the ground that when

6 ITA Nos. 2716 to 2718/Chny/2018 assessee could not filed certain evidences before the Assessing

Officer, then the same can be filed before the appellate authority

and the appellate authority having concurrent jurisdiction with the

Assessing Officer can very well admit the additional evidences, if

those evidences are relevant to decide the issues on merit and

accordingly, admitted the additional evidences filed by the assesse.

As regards additions made by the Assessing Officer towards cash

deposits found with the bank account of the assesse, the learned

CIT(A) observed that the Assessing Officer has arrived at peak

credit out of the cash deposits found in her bank account after giving

reasonable opportunity to the assessee to explain cash deposits

with necessary evidences. When the assessee has failed to explain

cash deposits found in her bank account through known source of

income, the Assessing Officer has chosen to estimate the income by

applying one of the possible method of arriving at peak credit and

hence, there is no error in the findings recorded by the Assessing

Officer in arriving at peak credit of cash deposits made in her bank

account and made addition u/s.69 of the Act. As regards estimation

of further income @8% profit u/s.44AD of the Act ,on balance cash

deposits, the Assessing Officer after considering necessary facts

including the evidences filed by the assesse has come to a right

7 ITA Nos. 2716 to 2718/Chny/2018 conclusion that balance cash deposits found in her bank account is

out of contract business, which is liable to be taxed under

presumptive rate of tax as prescribed u/s.44AD and accordingly

upheld the estimation 8% profit on balance cash deposit u/s.44AD of

the Act. Being aggrieved by the CIT(A) order, the assessee is in

appeal before us.

has erred in sustaining the additions made by the Assessing Officer

towards peak credit on account of cash deposits found in her bank

account without appreciating the fact that once bank credit is

accepted as turnover from her business and profit has been

estimated on presumptive basis u/s.44AD of the Act, then there is

no reason to accept part cash deposits as business receipts and

part as unexplained investments. In this regard, he relied upon

certain judicial precedents including the decision of Bangalore

Bench of this Tribunal in the case of Mr. Girish V.Yalakkishettar vs.

ITO, Hubli in ITA No.354 & 355/Bang/2019.

Assessing Officer as well as learned CIT(A) have brought out facts

8 ITA Nos. 2716 to 2718/Chny/2018 clearly that the assessee has failed to explain source of income for

cash deposits found in her bank account and accordingly has

arrived at unexplained investments by estimating peak credit

method for part of the cash deposits and the remaining cash

deposits has been accepted as contract receipts and estimated 8%

profit by applying the provisions of section 44AD of the Act.

Therefore, there is no error in the findings recorded by the

authorities below to estimate income out of unexplained cash

deposits found in the assessee’s bank account, hence their orders

should be upheld.

on record and gone through the orders of authorities below. The

undisputed facts emerge clearly indicate that the assessee has not

disclosed her savings bank account maintained with Bank of India,

West Mambalam branch. Further, when the case has been taken

up for reassessment, the assessee has come out with explanation

that cash deposits found in her bank account is out of contract

receipts which was not disclosed to income-tax purpose, however,

admitted before the Assessing Officer that net profit may be

estimated by applying provisions of section 44AD of the Act. The

Assessing Officer has accepted the explanation furnished by the

9 ITA Nos. 2716 to 2718/Chny/2018 assessee in part and accordingly divided cash deposits found in her

bank account into two parts, i.e one from unexplained investments

and the other from out of business receipts. Insofar as unexplained

investments, the Assessing Officer has arrived at peak credit on a

particular date and made addition u/s.69 of the Act as unexplained

investments. The balance amount of cash deposits has been

accepted as business receipts and has estimated 8% net profit

by applying presumptive profit u/s.44AD of the Act. It was the

contention of the assessee that once bank credit is accepted as

turnover from her business on presumptive basis u/s.44AD of the

Act, there is no reason to treat the remaining amount of cash

deposits as unexplained investments which is to be taxed u/s.68

or 69 of the Act. We find merit in the arguments taken by the

assessee for the simple reason that Assessing Officer himself has

admitted the fact that assessee has receipts from her business of

civil contract and the same has to be taxed at 8% on presumptive

basis u/s.44AD of the Act. Once part of bank credit is accepted as

turnover on presumptive basis and has taxed accordingly by

applying the provisions of section 44AD of the Act, then there is no

reason for the Assessing Officer to take a different view for

remaining part of cash deposits found in the same bank account

10 ITA Nos. 2716 to 2718/Chny/2018 and treat the same as unexplained investments to be taxed u/s.69

of the Act, because it is an admitted that the assessee has proved

with necessary evidences that she has received cash from

business activity of civil contract and interior decoration work. It is

also admitted fact that said activity has not been disclosed in

income-tax return filed for relevant year and the assessee has not

maintained regular books of account for the said activity. The

Assessing Officer having accepted the explanation furnished by the

assessee regarding her business activity and source of income for

cash deposits found in her bank account, he ought to have

accepted the explanation furnished by the assessee towards total

cash deposits found in her savings bank account.

deposits as out of her business receipts and part of cash deposits

as her unexplained investments, without brought on record any

cogent reasons to justify different view taken on cash deposits found

in her bank account during the same financial year. The learned

CIT(A) has also simply upheld the findings of the Assessing Officer

without assigning any reason why explanation furnished by the

assessee regarding source of income for cash deposits found in

11 ITA Nos. 2716 to 2718/Chny/2018 her bank account was accepted in part, cannot be accepted for

remaining cash deposits found in the same bank account.

Therefore, we are of the considered view that Assessing Officer as

well as learned CIT(A) were erred in assessing part of cash deposits

as unexplained investments to be taxed u/s.69 of the Act and part

of cash deposits as receipts from business liable to be taxed

u/s.44AD of the Act. Hence, we direct the Assessing Officer to treat

the total cash deposits found in her bank account maintained with

Bank of India, West Mambalam branch as receipts from her civil

contract business and estimate 8% net profit on total receipts as per

the provisions of section 44AD of the Act. In the result, the appeal

filed by the assessee for the assessment year 2010-11 is partly

allowed.

ITA No.2716/Chny/2018(AY 2009-10):

the issues considered in preceding paragraphs in ITA

No.2717/Chny/2018 for the assessment year 2010-11. The slight

difference in facts of this case is additions made by the

Assessing Officer regarding cash deposits found in the bank

account. For the impugned assessment year, the Assessing

Officer has made additions towards total amount of cash deposits

12 ITA Nos. 2716 to 2718/Chny/2018 found in her bank account as unexplained investments u/s.69 of

the Act. The learned CIT(A) by following his findings recorded for

the assessment year 2010-11, has directed the Assessing Officer

to make additions towards cash deposits found in her bank account

by applying peak credit theory and for remaining balance amount

found in her bank account , direct the Assessing Officer to treat the

same as receipts from her contract business and estimate 8% net

profit by applying the provisions of section 44AD of the Act.

2010-11 and for the reasons stated therein, we direct the Assessing

Officer to treat the total cash deposits found in her SB account

maintained with Bank of India, West Mambalam branch, as her

receipts from contract business and estimate 8% net profit by

applying the provisions of section 44AD of the Act. The facts in

the present year are pari materia with the facts which we have

considered for the assessment year 2010-11.Therefore, for similar

reasons recorded in preceding paragraphs in ITA No.2717/Chny/2018, we direct the Assessing Officer to treat the

total cash deposits found in her bank account maintained with Bank

of India, West Mambalam branch, as receipts from her civil contract

13 ITA Nos. 2716 to 2718/Chny/2018 business and estimate 8% of net profit on presumptive basis by

applying the provisions of section 44AD of the Act.

ITA No.2718/Chny/2018(AY 2011-12):

to the facts which we have considered in appeal in ITA

No.2717/Chny/2018 for the assessment year 2010-11, except to

the extent of difference in treatment of cash deposits found in her

bank account, inasmuch as the Assessing Officer has treated total

cash deposits found as unexplained cash deposits to be taxed

u/s.68 of the Act. The learned CIT(A) by following his order for

assessment year 2010-11, has directed the Assessing Officer to

estimate income towards cash deposits found in her bank account

by applying theory of peak credit and for the balance cash

deposits as receipts from contract business liable to be taxed @

8% on net profit on presumptive basis under the provisions of

section 44AD of the Act.

facts for assessment year 2010-11 and for the detailed reasons

stated in the preceding paragraphs, we direct the Assessing Officer

to treat the total cash deposits found in her SB account maintained

with Bank of India, West Mambalam branch, as her receipts from

14 ITA Nos. 2716 to 2718/Chny/2018 contract business and estimate 8% net profit by applying the

provisions of section 44AD of the Act. The facts for the year

under consideration are pari materia with that of facts considered

by us for the assessment year 2010-11. We, therefore, for similar

reasons recorded in preceding paragraphs in ITA

No.2717/Chny/2018, direct the Assessing Officer to treat the total

cash deposits found in her bank account maintained with Bank of

India, West Mambalam branch, as receipts from her civil contract

business and estimate 8% of net profit on presumptive basis by

applying the provisions of section 44AD of the Act.

assessment years are partly allowed. Order pronounced in the open court on 15th December, 2020

Sd/- Sd/- ( वी. दुगा� राव ) ( जी.मंजुनाथ ) (V.Durga Rao) (G.Manjunatha) "या�यक सद%य /Judicial Member लेखा सद%य / Accountant Member चे"नई/Chennai, (दनांक/Dated 15th December, 2020 DS आदेश क� ��त*ल+प अ,े+षत/Copy to: 1. Appellant 2. Respondent 3. आयकर आयु-त (अपील)/CIT(A) 4. आयकर आयु-त/CIT 5. +वभागीय ��त�न1ध/DR 6. गाड� फाईल/GF.