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Facts
The assessee, a bus operator, did not file an Income Tax Return for AY 2017-18. The case was reopened due to cash deposits identified in his bank account. The Assessing Officer (AO) made additions for unexplained cash under Section 69A (Rs. 7,50,000/-) and estimated business income under Section 44AD (Rs. 5,32,400/-). The CIT(A) restricted these additions to Rs. 3,50,000/- and Rs. 1,50,000/- respectively.
Held
The Tribunal dismissed Ground 1 challenging the initiation of proceedings due to no submission from the assessee. Ground 2, concerning the Section 69A addition, was allowed, and the remaining addition of Rs. 3,50,000/- was deleted, finding sufficient cash balance from bus operations. Ground 3, related to the Section 44AD addition, was also allowed, deleting the Rs. 1,50,000/- addition as the assessee incurred a loss after depreciation.
Key Issues
Whether the additions for unexplained cash deposits under Section 69A were justified given the assessee's cash balance from business operations. Whether the estimation of business income under Section 44AD was valid when the assessee declared a loss after accounting for depreciation.
Sections Cited
148, 147, 144, 69A, 44AD, 115BBE, 271(1)(c), 142(1), 39A
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Income Tax Appellate Tribunal, JAIPUR BENCHES,’’SMC” JAIPUR
ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal filed by the assessee is directed against the order of the learned Commissioner of Income Tax, National Faceless Appeal Centre, Delhi [ for short ld. CIT(A) ] dated 27-01-2025, for the assessment year 2017-18 raising therein following grounds of appeal. ‘’1. That on the facts and law in the circumstances of the case the AO grossly erred in initiating the proceedings u/s 148 and passing the order u/s 147 r.w.s. 144 of the Act.
2. That on the facts and law in the circumstances of the case the ld.CIT(A) grossly erred in restricting the addition to Rs.3,50,000/- against addition of Rs.6,00,000/- u/s 69A of the Act.
SHRI DILIP SINGH VS ITO, WARD -1, JHUNJHUNU 3. That on the facts and law in the circumstances of the case the ld. CIT(A) grossly erred in restricting the addition to Rs.1,50,000/- against the addition of Rs.5,32,500/- made by the AO on the basis of estimation of income u/s 44AD of the Act.’’ 2.1 During the course of hearing, the ld. AR has not advanced any submission as to the Ground No. 1, raised above. Hence, the same is dismissed. 3.1 Apropos ground No. 2 and 3, it is noticed that the ld. CIT(A) has partly allowed the appeal of the assessee by observing as under:- Ground No. 2 observation ‘’7. Ground no. 2: This ground is against addition u/s 69A. It is claimed that the basis of addition was incorrect information available on portal. The AO has noted that Rs. 7,50,000/- were deposited in cash during demonetization period. The appellant has not disputed the figure nor has specified any other figure as cash deposited during demonetization. However, in submission dated 21.03.2022 before the AO, he has given breakup of the cash payments made during demonetization against overdue loan installments pertaining to vehicles. Such sum, also verifiable from details of cash deposited during FY 2016-17 filed separately is Rs. 6,00,000/-. On the other hand, the AO has not specified any account wise details. Therefore, the amount of Rs. 6,00,000/- is considered acceptable as cash deposited during demonetization. 7.1 I have considered the issue carefully. The appellant has not explained the sources of the cash before the AO as well as during appeal. It is merely stated that he is a bus operator and suffered losses during the year due to ill health and was not liable to file return. 7.2 However considering that the appellant is engaged in a business which deals largely in cash, availability of SBNs at the time of demonetization cannot be ruled out. Such figure can be safely estimated at Rs. 2,50,000/- considering CBDT instructions. The addition is therefore restricted to Rs. 3,50,000/-. The ground is partly allowed. Ground No. 3 observation SHRI DILIP SINGH VS ITO, WARD -1, JHUNJHUNU 8. The ground no. 8 pertains to estimation of income @ 8% of the turnover. It is contended that the AO has erred in making the addition, has not considered reply and books of account. The AO has considered the P & L submitted and the information produced in support thereof. The appellant has claimed elsewhere that the profit was low due to his ill health. Considering the same and loss of business during demonetization, the estimation @ 8% is considered high. Moreover, part of the profits made before demonetization are subsumed in the addition u/s 69A. Therefore, the addition on account of business profit is restricted to Rs. 1,50,000/- on an estimation basis. The ground is partly allowed.
3.2 During the course of hearing, the ld.AR of the assessee submitted that the assessee has filed all the documents concerning the issue in question but it was not taken into consideration by the lower authorities and thus made the addition in the hands of the assessee for an amount of Rs.7,50,000/- as unexplained cash deposit u/s 69A and Rs.5,32,400/- as business income of the assessee u/s 44AD of the Act. The detailed written submission as advanced by the ld. AR of the assessee is reproduced as under:- Ground No. 2 Restriction of addition of Rs 3.50,000/- against . 6.00.000/- u/s 69A of the Act.
The assessee appellant is an individual and engaged in the business of the bus operator in the name of Sangam Travels. The assessee has started its business just prior to the period under consideration.
That assessee purchase all the buses with the help of Hundred Percentage bank finance scheme. The assessee appellant had no other income during the year under consideration and due to his new business resulted in huge losses and bad health he did not file his return of income for the year under consideration.
SHRI DILIP SINGH VS ITO, WARD -1, JHUNJHUNU 3. The case of the assessee was reopened under section 148 of the Act on the basis of INCORRECT AND VAGUE INFORMATION regarding cash deposition of Rs. 1,12,61,750/-in Indusind Bank Account and on the basis of that information proceeding u/s 148 of the Act were initiated against the assessee vide notice dated 31.03.2021. That in response to notice Issued u/s 148, the assessee filed its return of income declaring loss of Rs 5,91,977/ 4. That during the assessment proceeding the assessee submits that the information on the basis of which re-assessment proceeding initiated against the assessee is completely vague and baseless as there is no such huge deposit of Rs 1,12,61,750/-in Indusind Bank Account of the assessee and assessee filed the detail objection and submitted that assessee during the year under considering had only deposit Rs 22,52,350 in Indusind Bank Account which is buses fares collected during the tour of the buses. The Id. Assessing officer after considering the objection, accepted the mistake apparent from the system.
The Show cause notice issued to the assessee alleging that the assessee deposit Rs 7,50,000/- in bank account of the assessee during demonetization period. That in response to notice the assessee appellant submits that assessee has deposit cash in the bank account to repay its loan which were taken to purchase the buses and detail of which is as under:- Vehicle Loan Overdues Date instalment Payment Account No. instalments payment amount Rs. amount (Rs. RJH00918D 1,24,773/- 15.11.2016 50,000/- RIH00839D 99,825/ 11.11.2016 1,40,000/- RJH00644D 1,19,779/- 28.11.2016 31,000/- RJH00851D 1,43,943/- 15.11.2016 1,50,000/- RJH00851D 49,943/- 24.11.2016 77,000/- RJH00800D 1,10,826/- 11.11.2016 1,52,000/- Total cash 6,00,000/- payment against the instalment
That total cash deposit by the assessee during the period is Rs 6,00,000 which is only buses fare receipts. The Id. Assessing officer without considering the submission and documents submits during the assessment proceeding, SHRI DILIP SINGH VS ITO, WARD -1, JHUNJHUNU made addition of Rs 7,50,000/- u/s 69A of the Act when assessee discharge its burden of proof by submitting the complete details of loan account, cash book, bank statement, ledger etc.
That against the assessment order passed by the assessing officer, assessee preferred an appeal before Id. CIT(A) and Id. CIT(A) verifying the detail of cash deposit during demonetization period, admit that actual cash deposit by the assessee appellant is Rs 6,00,000/- only, but without considering the submission of the assessee and ignoring the facts that the cash deposit made by the assessee is buses fares receipts only, the Id. CIT(A) relied upon the CBDT instruction, delete only 2,50,000/- and sustained the remaining addition of Rs 3,50,000/-.
That Id. CIT(A) failed to consider that assessee has deposit the cash which is received by way of buses fares which received only in cash. That during the year under consideration assessee received total bus fares of Rs 22,52,350/- and out of which only Rs 6,00,000/- were deposit during the demonetization period which is also in loan account not in the saving bank account of the assessee. The assessee also submits the copy of loan account before the Id. Assessing officer and before the Id. CIT(A) and same was ignore by the lower authority and therefore it is humble requested to kindly delete the addition of Rs 3,50,000/- sustain by the Id. CIT(A).
Ground No. 3 Sustained the trading addition of Rs 1,50,000/-against the addition of Rs 5,32,500/-on the basis of estimation of income.
That during the year under consideration assessee declares loss of Rs 5,39,282/- and total receipts shown by the assessee is Rs 66,55,000/-. The Id. Assessing officer estimated the income of the assessee after applying 8% of the turnover and made addition of Rs 5,32,000/- on the estimated basis. That Id. CIT(A) considering the 8% addition higher side and reduce the addition to 1,50,000/-. That it is humbly submitting that the once the addition made u/s 39A of the Act, the income cannot be estimated when assessing officer has made addition on account of unexplained cash deposit. The benefit of telescoping has to be given to the assessee. The unexplained cash has been made out of the unexplained Income. That instead of adding both unexplained income as well as unexplained investment to the income of the assessee, it would be wise to add one of them, as both represent only one income.
SHRI DILIP SINGH VS ITO, WARD -1, JHUNJHUNU With this background, we request your honour to take stock of the situation In totality and allow the appeal of the assessee and delete the addition made by the Id. Assessing Officer and oblige.’’ To support his submissions, the ld.AR of the assessee has filed following the paper book. S.N. Particular Page No.
1. Written submission 1 to 4 2. Copy of ITR & Computation alongwith the P/L a/c and 5 to10 balance sheet 3. Copy of cash book 11-65 4. Copy of ledger of bank loan a/c 66-71 5. Copy of cash deposit during the year under consideration 72 6. Copy of bank statement of loan account 73-85 3.3 On the other hand, the ld. DR supported the order of the ld.CIT(A). 3.4 We have heard both the parties and perused the materials available on record. It is noted from the assessment order dated 25-03-2022 that the assessee had not filed the return of income for the year under consideration. On scrutiny of the information/ details available on ITBA system/record, it was noticed by the Department that the assessee had deposited cash amounting to Rs.1,12,61,750/- in his bank account during the assessment year 2017-18. In response to notice u/s 148 of the Act, the assessee neither filed return of income nor furnished any reply to the Department. Accordingly, notice u/s 142(1) of theAct alongwith a questionnaire dated 6-07-2021 was issued to the assessee. Again, notices SHRI DILIP SINGH VS ITO, WARD -1, JHUNJHUNU u/s 142(1) of the Act dated 18-11-2021 and 13-01-2022 were issued to the assessee to submit necessary details/ explanation/ evidences. The assessee sent various notices but the assessee failed to comply with statutory notices from time to time. A final show cause notice dated 19-02- 2022 was issued to the assessee mentioning therein that as to why the assessment should not be completed u/s 144of the Act. Finally, the assessee submitted reply dated 25-02-2022. Conclusively, the AO made addition in the hands of the assessee by observing as under:- ‘’5. The scheme of Section 69A of the Income-tax Act, 1961, would show that in cases where the nature and source of acquisition of money, bullion, etc., owned by the assessee is not explained at all. or not satisfactorily explained, then, the value of such investments and money or value of articles not recorded in the books of accounts may be deemed to be the income of such assessee. The provisions of section 69A of the Act treat unexplained money, bullion, etc., as deemed income where the nature and source of investment, acquisition as the case may be, have not been explained or satisfactorily explained. Since, assessee has not explained source of cash deposited in the Bank account Therefore, cash deposits in thesaving account of Indusind Bank of Rs.7,50,000/- are treated as unexplained money u/s 69A as per the provisions of Section 115BBE is to be taxed at special rate of the I.T. Act, 1961. In view of the above, the unexplained cash deposits of Rs. 7.50,000/- are added to the income of the assessee uls 69A of the Act. I am satisfied that assessee has concealed particulars of his income. Therefore, penalty proceedings u/s 271(1)(c) of the Income Tax Act, 1961, is being initiated separately. [Addition: Rs. 7,50,000/-] 6. As per Profit and loss account submitted by the assesseetotal receipts has been reported at Rs. 66,50,000. As per assessee's submission and document available on record assessee is engaged in the business of operation of Bus Transport. Keeping in view of the detail submitted by the assessee and data available on record. Assessee has not audited its account so, Income of the assessee is being calculated reasonably @ 8% of the turnover u/s 44AD of the SHRI DILIP SINGH VS ITO, WARD -1, JHUNJHUNU act of the assessee. This comes to Rs. 5,32,400/- This amount is being treated as business income of the assessee and added to the income of the assessee. [Addition: Rs. 5,32,400/-] In first appeal, the ld.CIT(A) has partly allowed the appeal of the assessee restricting addition of Rs.3.50,000/- u/s 69A as made by the ld. AO for an amount of Rs. 6,50,000/- considering the CBDT instructions for an amount of Rs. 2,50,000/- and thereby sustaining the addition. While doing so he observed that the assessee is in business of plyingbus which is largely in cash and therefore, while observing that aspect of the matter he could have directed to delete the whole amount. The assessee has filed the cash book and we note that as on 01.11.2016 the assessee has cash balance of Rs. 10,33,552/- which is sourced from the Bus plying business and therefore, we see no reason to sustain the addition of Rs. 3,50,000/- and the same is directed to be deleted. In the light of these facts, ground no. 2 is allowed. 4.1 Now coming to the addition of Rs. 1,50,000/- u/s 44AD of the Act we note that the ld. AO made the addition @ 8 % of the turnover whereas ld. CIT(A) has partly considered the submission of the assessee that due to his ill health he suffered a loss and thereby he estimated income to the extent of Rs. 1,50,000/- on estimated basis against 8 % estimated by the ld. AO. Here we note that the assessee as per the ITR filed by the SHRI DILIP SINGH VS ITO, WARD -1, JHUNJHUNU assessee there is income of Rs. 3,55,639/- and thereafter due to claim of depreciation of Rs. 9,48,922/- there is a loss to the assessee. This aspect of the matter has not disputed by the revenue and therefore, if there is loss due to deprecation there is no reason to estimate the income. The assessee has filed the ITR and has claimed depreciation loss which was not disputed. In the light of these fact we see no reason to sustain the addition of Rs. 1,50,000/- and that too on estimated basis. Therefore, considering the entire gamut of the case, Ground No. 3 is allowed. 5.0 In the result, the appeal of the assessee is allowed Order pronounced in the open court on 08 /09/2025.