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Facts
The appellant, a stamp vendor, did not file a return for AY 2017-18. The AO, based on information of a Rs. 4,48,000 cash deposit in SBN during demonetisation and non-compliance with a Section 142 notice, completed a best judgment assessment under Section 144, adding Rs. 4,17,000 as business income and Rs. 4,48,000 as unexplained money. The CIT(A) upheld the AO's order.
Held
The Tribunal upheld the addition of Rs. 4,17,000 as business income. However, it directed that this business income could be 'telescoped' into the cash deposit, thereby deleting the separate addition of Rs. 4,48,000 made on account of cash deposit during demonetisation.
Key Issues
The key issues were the validity of the best judgment assessment, the justification of the separate additions for business income and cash deposits from demonetised currency, and whether the principle of telescoping could be applied to avoid double addition.
Sections Cited
139(1), 142, 144
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Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM & SHRI PRAKASH CHAND YADAV, JM
O R D E R Per: Inturi Rama Rao, AM This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre, Delhi [CIT(A)], dated 09.12.2022 for Assessment Year (AY) 2017-18.
Brief facts of the case are that the appellant is an individual engaged in the business of stamp vendor. No regular return of income was filed under the provisions of 139(1) of the Income Tax Act, 1961 (the Act) for AY 2017-18. The Income Tax Officer, Ward -5, Palakkad (hereinafter called "the AO"), based on the information that the appellant made cash deposit in Specified Bank Notes (SBN)
Kadamkurussi Palli Nagarajan during demonetisation period of Rs. 4,48,000/- in State Bank of India, Kollengode branch, issued a notice u/s. 142 of the Act calling upon the appellant to file the return of income. The appellant had not complied with the said notice. In the circumstances, the AO completed the best judgement assessment making addition on account of business income of Rs. 4,17,000/- and addition of Rs. 4,48,000/- as unexplained money of the appellant being cash deposit made during demonetisation period in SBN vide order dated 16.12.2019 passed u/s. 144 of the ACt.
Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order confirmed the action of the AO.
Being aggrieved, the appellant is in appeal before us in the present appeal.
We have heard the rival contentions and perused the material available on record. It is admitted fact that the appellant is engaged in the business of stamp vendor. On gross commission of Rs. 5,37,000/- the AO estimated the business income at Rs. 4,17,000/-. We uphold the action of AO in bringing to tax the business income of Rs. 4,17,000/-. However the addition of Rs. 4,17,000/- can be telescoped into the cash deposit made during the demonetisation period. Therefore, the addition on account of cash deposit during demonetisation period is not required. Accordingly, we direct the AO to delete the addition of cash deposit of Rs. 4,48,000/-.
Order pronounced in the open court on 22nd May, 2025.