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Facts
The assessee, a fruit trader, did not file an income tax return for AY 2012-13 but did so in response to a notice u/s 148. The Assessing Officer made an addition of Rs. 13,06,262/- to the assessee's income as unexplained cash deposits in his bank accounts. The assessee contended these deposits were from business transactions, prior cash withdrawals, and opening cash balances from his business.
Held
The Tribunal found that the assessee had sufficiently demonstrated the correlation between his business receipts, cash withdrawals, and the cash deposits in his bank accounts, which was overlooked by the lower authorities. The assessee's business model and explanation of cash flow were found to be credible. Consequently, the addition made by the Assessing Officer for Rs. 13,06,262/- as unexplained money was deemed unsustainable.
Key Issues
Whether the cash deposits in the assessee's bank accounts, explained as arising from business transactions, withdrawals, and prior cash balances, could be added as unexplained money.
Sections Cited
148, 133(6), 44AB, 44AD, 80TTA
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Income Tax Appellate Tribunal, AHMEDABAD “SMC” BENCH, AHMEDABAD
Before: Ms. Suchitra Kamble
आदेश/ORDER This is an appeal filed against the order dated 30-07-2025 passed by CIT(A), Ahmedabad-12 for assessment year 2012-13.
The grounds of appeal
1. 1. 1. 1. 1. 1. are as under:- “1. The Learned Commissioner of Income Tax (Appeals) erred in confirming the addition of cash deposit of Rs. 13,06,262/- despite the fact that these were cash out of business transaction and were made out of the cash withdrawals made from the bank.
2. The Learned Commissioner of Income Tax (Appeals) erred in disregarding the submission made during the course of appellate proceedings.
3. The Learned Commissioner of Income Tax (Appeals) erred in confirming the cash deposit of Rs. 13,06,262/- without giving any credit for cash withdrawals, savings and other details which were submitted during the course of appellate proceedings.
4. The Learned Commissioner of Income Tax (Appeals) erred in disregarding the factual aspect of the appellant while confirming the addition.
5. The appellant craves the right to add to or alter, amend, substitute, delete or modify all or any of the above grounds of appeal
.”
3. As per the information, the assessee deposited cash of Rs. 12,40,000/- during the assessment year 2012-13 in his saving bank account. The assessee did not file return of income during the year under consideration. The assessee has reason to believe that the income chargeable to tax had escaped to the tune of Rs. 12,40,000/-. Notice u/s. 148 of the Act was issued on 28-03-2019 and in compliance to the said notice, the assessee filed return of income declaring income of Rs. 1,77,440/- on 22-07-2019. The assessee is engaged in the business of trading of fruits during the year under consideration. During the course of assessment proceedings, notice u/s. 133(6) of the Act dated 11-10-2019 was issued to the Dahod Mercantile Co-operative Bank. In response to the said notice, the bank provided the bank statement of assessee from 01-04-2011 to 31-03- 2012. The assessee had debited cash of Rs. 12,40,000/- and credit entries and interest was that of Rs. 34,045/- during the relevant assessment year. The assessee submitted the preliminary details i.e. computation of income, audit report and bank statement of Axis bank for three accounts which mentioned by the assessee in his audit report filed. The Assessing Officer observed that the only one bank account was recorded in the books of the assessee and the remaining two accounts of Axis bank is not recorded in the books of the assessee. The bank account of the Dahod Mercantile Co-operative Bank Ltd. was not disclosed by the assessee and has not been answered by the assessee. Thus, the Assessing Officer has made addition of Rs. 13,06,262/- being cash deposit and credit entries in one of the bank accounts with Axis bank and the other bank account with Dahod Mercantile Co-operative Bank Ltd..
The assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.
The ld. A.R. submitted that the cash which was found deposited by the assessee in his personal bank account with Dahod Mercantile Co-operative Bank Ltd., the assessee had shown profit of Rs. 4,04,824/- u/s. 44AB of the Act which was cash balance with him at the end of the financial year 2010-11. Thus, a sum of Rs. 3,00,000/- was deposited in the month of May, 2011 represented the cash balance available at the end of the financial year 2010-11. Subsequently, the assessee had withdrawn sum of Rs. 2,99,000/- on 04-07-2011 and Rs. 2,00,000/- on 07-07-2011 as well as Rs. 99,000/-. Thus, this cash balance was available with the assessee before making deposit in the month of July and August, 2011. The assessee has given the rough cash details of cash books. The assessee has also given the certificate issued by Agricultural Produce Marketing Committee which indicates that the assessee was engaged in the business of trading in fruits since past many years and has received gifts from relatives as well as loans and advances received from buyer of fruits. The interest on saving bank account may be taxed after allowing deduction u/s. 80TTA as applicable for the assessment year under appeal. The ld. A.R. further submitted that the assessee was filing return of income u/s. 44AD of the Act till assessment year 2011-12 . The income was offered u/s. 44AD and the opening balance stated in the rough cash book is based on the provisions of section 44AB of the Act. Thus, the ld. A.R. submitted that the said cash balance should be accepted for the purpose of determining the cash deposits made till financial year 2011-12. The ld. A.R. further submitted the addition made by the Assessing Officer of Rs. 13,02,262/- be deleted.
The ld. D.R. submitted that the assessee has not filed return of income in this year and has filed the return at the time of issuance of notice u/s. 148 of the Act. The ld. D.R. further submitted that the assessee has not demonstrated that these deposits were from the trading business in fruit conducted by the assessee. Thus, the ld. D.R. relied upon the order of the CIT(A).
We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the assessee has filed his return of income in response to notice u/s. 148 of the Act in the present assessment year. But the assessee was filing the return in the earlier year u/s. 44AD and the same was accepted by the Revenue in the earlier assessment years. The assessee while conducting the business of trading in fruits has categorically given the details of the profits in respect of the said fruits and has given the detail of rough calculation of the cash books before us. From the computation of total income, the assessee was having the cash balance of Rs. 3,00,000/- and also the profit was shown at Rs. 4,04,824/-. The fact remains that the assessee has given the details of his business and his business model that of trading in fruits were never doubted by the Assessing Officer. The assessee has demonstrated before the Assessing Officer through his bank statement that the assessee was continuously receiving cash as relates to his business income and was deposited the same in the bank account from time to time. The assessee has also shown the corresponding withdrawal as the assessee was purchasing the fruits for trading as well. Thus, the co-relation of the business receipts was established fully by the assessee before the Assessing Officer as well as before the CIT(A) but the same was totally ignored by the 4 Faruk Mohammadhusain Patel, A.Y. 2012-13 both the authorities. Thus, the addition made by the Assessing Officer as unexplained money to the extent of Rs. 13,06,262/- does not sustain.
In the result, the appeal of the assessee is allowed.