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Income Tax Appellate Tribunal, AHMEDABAD “SMC” BENCH
Before: Ms. Annapurna Gupta & Shri Mahavir Prasad
Appellant by : Shri Vimal D. Shukla, A.R. Respondent by : Shri N.J. Vyas, Sr. D.R. Date of hearing : 03-02-2022 Date of pronouncement : 09-03-2022 आदेश/ORDER PER : ANNAPURNA GUPTA, ACCOUNTANT MEMBER:-
The present appeal has been filed by the Assessee against the order passed by the Commissioner of Income Tax (Appeals), Gandhinagar, Ahmedabad, (in short referred to as CIT(A)), dated 01-03-2019, u/s. 250(6) of the Income Tax Act, 1961(hereinafter referred to as the “Act”) pertaining to Assessment Year (A.Y) 2009- 10.
The solitary issue in the present appeal relates to addition made on account of cash deposits in the bank account of the assessee remaining unexplained. The total cash deposits amounted to Rs. 32, 08,000/- which were added as being unexplained by the A.O. but were restricted to Rs. 12,83,200/- by the Ld. CIT(A) partly accepting Page No 2 Shri Pravinkumar Lalbhai Patel vs. ITO the assessee’s explanation regarding the same. It is this balance addition of Rs. 12,83,200/- on account of unexplained cash deposits ,confirmed by the Ld.CIT(A) which the assessee has challenged before us raising the following effective grounds:
1. 1. The learned CIT(A) has erred both in law and on the facts of the case in confirming partly the addition of Rs. 12,83,200/- on account of treating Cash deposits as unexplained credits u/s. 68 of the Act.
2. Both the lower authorities have passed the orders without properly appreciating the fact and that they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have i)een considered before passing the impugned order. This action of the lower authorities is in clear breach of law and °rinciples of Natural Justice and therefore deserves to be quashed.
We have gone through the order of the Ld. CIT(A) and we have noted there from that the Ld. CIT(A) had partly accepted the assessee’s explanation of the cash deposits being sourced from the cash withdrawal . The Ld. CIT(A) noted the fact that the assessee had returned income on presumptive basis u/s. 44AD of the Act on his business as contractor and accordingly had attributed a portion of the cash withdrawals, being 60% ,as having been utilized by the assessee in his business as also for his personal requirements while for the balance , the benefit of the same being available for deposit was given to the assessee which amounted to Rs. 18,94,800/-. Accordingly relief to this extent was given to the assessee. The relevant findings of the Ld. CIT(A) at para 6.4 and 6.7 of the order is as under: 6.4 I have considered all the above facts and examined the facts of the appellant afresh and independently. As per the copy of bank account maintained by the appellant and furnished in the paper book, there was opening balance of Rs.4,177/- and the appellant deposited cash of Rs.4,00,000/- during the period 04.04.1008 to 08.04.2008, Then he withdrew the amounts on 8.04.2008 (Rs;50,000/- the date on which the cash of Rs.50,000/- was deposited) and Rs.1,90,000/- on 11.04.2008 and further amount ofrRs.10,000/- on 14.04.2008. Then, on the next date i.e. 15.04.2008, he deposited the cash of Rs.1,20,000/- and withdrawn Rs.80,000/- within 4 days. Thus, this frequent withdrawals and cash deposited continued throughout the year. The total credits in this bank has been reported at Rs.55,13,218. 01. including nominal bank interest of Page No 3 Shri Pravinkumar Lalbhai Patel vs. ITO Rs.1,938/- as identified by the A.O. in the assessment order. The credits on account of cash deposited on this bank account (as per appellant's version) were of Rs.32,08,000/- meaning thereby, there were credits of Rs.23,03,280/- made through cheques. The appellant has disclosed, the contract receipts of Rs.6,15,249/- and his father Shri Lalbhai P. Patel has disclosed the contract receipts of Rs.l5,56,340/-totalling to Rs.21,51,589/-. Thus, there is short-fall of Rs, l,51,691J- which stiil remained to be explained. Further, it is highly improbable that the cash withdrawn was again credited in the same bank account within short period and no payments for the expenses retaining the profit of 8% or more, which must have been incurred by these two persons who .were claimed to be the contractors for Uttar Gujarat Vij Co. Ltd. on which TDS has been made on the contract receipts which had been considered for adopting the deemed profit u/s;44AD of the Act. Further, the appellant did not furnish any details about the cheque transactions and its relevancy with the contract receipts offered in. the returns of income. The assessment of appellant's father was finalized by the different Assessing Officer viz. TTO, Ward-4, Mehsana on 27.12.2016 whereas the assessment order in the appelalnt's case was passed by the ITO, Ward-2, Mehsana on 21.10.2016, i.e. before 2 months of the assessment in the case of Shri Lalbhai P. Patel(appellant's father) was completed. Therefore, no coherency between the findings of two different Assessing Officers can be relied upon as the former Assessing Officer had decided the issue for the reason of appellant's non-compliance of various notices whereas the latter assessment order was completed after considering the submissions in the case of appellant and there might be a contention raised before that Assessing Officer that the unexplained cash had already been taxed in the case of appellant. Therefore, the contentions raised in this regard cannot be accepted. 6.5………………………. 6.6………………….. 6.7 Considering all these facts, it would be most fair and reasonable to tax 40% of the cash deposited of Rs.32,08,000/- in the said bank account as unexplained cash credits which is worked out to Rs.12,83,200/- presuming that 60% of the cash withdrawn would be used for meeting with the business requirements as contractors for making various payments to labourers engaged by the appellant, personal household needs and other ^expenses which were required tobe incurred for earning the contract receipts. The Page No 4 Shri Pravinkumar Lalbhai Patel vs. ITO appellant gets relief of Rs.l8,94,800 on this account. The balance amount of Rs.12,83,200/- out of Rs.31,78,000/- is confirmed. Thus, ground no.2 is partly allowed.
We have also carefully considered the explanation of the ld. Counsel for the assessee of the source of cash deposits made before the lower authorities and reiterated before us also. Briefly stated the contention of the ld. Counsel for the assessee was (i) the bank account in which the cash was found deposited ,was a joint account of the assessee with his father (ii) both were in the business of contractors and had returned income from the same to tax on presumptive basis u/s. 44AD of the Act by applying the rate of 8% on the gross receipts reflecting profits of Rs. 49,220/- and Rs. 6,15,249/- in relation to turnovers of Rs. 1,24,507/- and 15,56,340//- by the assessee and his father respectively. (iii) that these incomes had been accepted by the A.O. both in case of his father in scrutiny assessment and in the case of the assessee also. (iv) that the cash deposits were therefore not entirely attributable to the assessee alone. (v) that in any case the cash withdrawals from the account far exceeded cash deposited, being 45,95,940/- as against deposits of 32,08,000/- and the deposits therefore could be entirely attributable to the withdrawals. (vi) that the Ld. CIT(A) while restricting the addition to 40% of the cash deposited had stated the reason for the same as 60% of the withdrawals being reasonably sufficient for utilizing in his business and personal purposes. Ld. Counsel for the assessee contended that by this logic since the withdrawals by cheque of the assessee far exceeded his business expenses attributable in his case even as per the Section 44AD of the Act, the entire cash withdrawn was available for redeposit.
In this regard, Ld. Counsel for the assessee submitted in the following before us :
Page No 5 Shri Pravinkumar Lalbhai Patel vs. ITO 3.3. It is hereby respectfully submitted that the learned CIT has proceeded on the assumption that 60% of cash withdrawal would have been used for meeting business requirements, personal household needs and other expenses which were required to be incurred for earning the contract receipts. In this connection, it is submitted that the appellant has issued account payee cheques aggregating to Rs.7,82,743/- from time to time to various parties for his business purposes. Therefore, it is incorrect to assume that 60% of the cash withdrawals were used for business purposes and other expenses. We enclose the summary of such payments made through account payee cheques during the period under consideration vide page No. 47 of the paper book. The turnover of the appellant and his father, their presumed expenses and net profit are given below: Particulars Amount in Rs. Mr. Pravinkumar Mr. Lalbhai Patel (Father of Total Pate) (Appellant) the appellant and Joint Holder of Bank A/c) Turnover 6,15,250 15,56,338 21,71,588 Less: Profit @8% 49,220 1,24,507 1,73,727 Total Expenses @92% 5,66,030 14,31L831 19,97,861 Less: Expenses incurred by Account N.A. N.A. 7,82,743 Payee cheques Expenses incurred in Cash N.A. N.A. 12,15,118 Cash available for business and household expenses as per the cash flow statement above: 20,40,240
Ld. DR however supported the order of the Ld.CIT(A).
We have heard both the parties. It is an undisputed fact that the bank account in which the cash was deposited was a joint account of the assessee with his father. That both were in the business of contractors and had returned income on presumptive basis u/s 44AD of the Act @ 8% net profit on business receipts of Rs. 6,15,250/- and Rs. 15,56,338/- respectively, which has been accepted in scrutiny assessment by the Revenue. Ld.DR was unable to controvert the above facts before us.
Page No 6 Shri Pravinkumar Lalbhai Patel vs. ITO 7.1 Considering the aforesaid facts, we fail to understand how the entire cash deposited has been/could be attributable to that belonging to the assessee alone particularly when no reason has been given by the Revenue for doing so. Noting that the admitted business receipts of the assessee and his father were to the extent of Rs. 6,15,250/- and Rs. 15,56,338/- i.e. in the ratio of 1: 2.5, it would be reasonable to attribute the cash deposits in the said bank account in the same ratio, applying which the cash deposits attributable to the asessee at the most comes to Rs. 9,16,500/- (32,08,00 x 1/3.5). The addition in any case of unexplained cash deposits, we hold, could not have exceeded Rs.9,16,500/-
Going further we also find that even as per the logic of the Ld. CIT(A) that only the cash available with the assessee from the withdrawals after meeting business and personal expenses could be attributable as deposited in the bank ,the Ld.CIT(A) has failed to consider the cheques issued from the said bank account. Even if the same have not been shown to have been issued for business purposes they can be treated as utilized for personal purposes, the cheques also therefore need to be considered for determining the cash withdrawn available for redeposit after utilization for business and personal purposes. As per the calculation submitted by the assessee, as reproduced above, the cash available from the cash withdrawn after meeting business and personal expenses comes to Rs.20,40,240/- which can be reasonably restricted to Rs.18,00,000/- by a conservative estimate .Attributing the portion relating to the assessee in the ratio of sales the same comes to around Rs.6,00,000/- approx .The cash deposit attributable to the assessee being held by us to be amounting to Rs. 9,16,500/- the available cash of Rs.6 lacs leaves only an amount of Rs.3 lacs odd as unexplained.
Since the entire exercise is based on surmises and approximations ,the resultant unexplained cash deposit of Rs.3 lacs odd out of total cash deposits of Rs. Page No 7 Shri Pravinkumar Lalbhai Patel vs. ITO 32,08,000/-,being barely 10% of the same is too immaterial to be treated as cash deposit remaining unexplained.
We therefore hold that there was no case at all for making any addition on account of unexplained cash deposits. The addition therefore made Rs. 12,83,200/- is accordingly directed to be deleted.
In effect, appeal of the Assessee is allowed.