ITO WD 2(5), THANE vs. NANDKUMAR JAGANNATH KALE, THANE

Revenue has raised the following grounds: - 1.1 Whether on the facts and in the circumstances of the case, and in law, the Hon'ble CIT(A) erred in not confirming the addition of Rs. 61,87,100/- on account of unexplained cash deposits.

The order of the CIT(A) may be vacated and that of the Assessing Officer may be restored.

The Ld. DR submitted that the assessee failed to explain cash deposits made in the bank account and in fact the assessee has not given any details before the Assessing Officer and therefore the Assessing

We have perused the orders of the Assessing Officer as well as the Ld.CIT(A), no doubt there was no explanation nor details were furnished before the Assessing Officer at the time of the Assessment Proceedings. However, in the course of proceedings before the Ld.CIT(A) the assessee did submit the bank statement etc., and contended that the cash deposits were made from out of the moneys withdrawn from the bank. It was contended as the bankers had informed the assessee that the transactions in his bank account were insufficient to raise finances from the bank and to show increase in transactions in the bank account the assessee withdrawn and deposited the same cash in his bank account. It was also contended that in the preceding Assessment Year also i.e., 2009-10 similar transactions had been done in the bank account and the Assessing Officer made peak addition while completing the assessment u/s. 143 of the Act. It was also contended that if the explanation of the assessee with regard to the source of deposits being earlier withdrawal is (A.Y: 2011-12) Shri Nandkumar Jagannath Kale not accepted then only the peak of all transactions should be added. Various case laws have been cited before the Ld.CIT(A).

The Ld.CIT(A) called for remand report on the submissions made by the assessee and considering the submissions of the assessee and the remand report of the Assessing Officer the Ld.CIT(A) concluded that the total cash deposits were at ₹.61,87,100/- and the cash withdrawal from the bank account through ATM amounted to ₹.65,54,700/-. After analyzing these transactions, the Ld.CIT(A) concluded that ₹.34,37,200/- deposited in cash at different outstation locations is nothing but unaccounted sales and the Ld.CIT(A) estimated the Gross Profit @16.23% on these unaccounted sales by adopting the G.P. Percentage shown by the assessee during the current year and directed the Assessing Officer to add the same as income of the assessee. On the balance cash deposits in the assessee account are concerned the Ld.CIT(A) directed to treat only the peak of the transactions as addition as there are corresponding cash withdrawals from the bank account and deposits of the same amount into the bank account. While holding so the Ld.CIT(A) observed as under: - “11. I have carefully considered the appellant's submissions, the observations of the AO in the assessment order and the two remand reports and the appellant's submissions on the same. From the details of the cash deposits in the appellant's bank account with ICICI Bank, it is seen that the total cash deposited in this bank account amounts to Rs.61,87,100/- for the year under consideration. Cash has been withdrawn from the this bank account through ATM withdrawals amounting to Rs. 65,54,700/- for the year. The appellant's submissions regarding the source of all the cash deposits being out of earlier (A.Y: 2011-12) Shri Nandkumar Jagannath Kale withdrawals, cannot be accepted because a major portion of the cash amount has been deposited at different locations like Ajmer, Jaipur, Udaipur, Madurai, etc., whereas the withdrawals of cash have been made at Bhayander, Mumbai. Therefore, there does not appear to be any apparent co-relation between the cash withdrawn at Mumbai and the cash deposited at various destinations. For this reason, the appellant's alternative submission regarding addition of only 'peak' of all the transactions cannot be accepted because for working out the peak, a reasonable co-relation has to be there between amount withdrawn and deposited in the bank account. The only inference which can be drawn, as far as the cash deposited at outstation locations is concerned, is that the appellant was making unaccounted sales to parties at different destinations, who used to deposit cash in the appellant's bank account at those destinations. Therefore, the amount of Rs.34,37,200/- deposited in cash in the appellant's bank account at different outstation locations is held to be the appellant's unaccounted sales. The appellant has shown a net profit rate of 16.23% on the declared sales in the Profit & Loss account. Therefore, the profit on the unaccounted sales is worked out at Rs. 5,57,857/- by applying the net profit rate of 16.23% on unaccounted sales of Rs. 34,37,200/- and the same is added to the appellant's income.

As far as the balance cash deposits in the appellant's bank account are concerned, it is seen that there are corresponding cash withdrawals also from the bank account as already mentioned above. Therefore, at the most a 'peak' of such transactions can only be added to the appellant's income in view of various decisions relied upon by the appellant and reproduced as above. The appellant has worked out the 'peak' at Rs. 1,08,000/- in respect of total transactions including cash deposited at Bhayander as well as at outstation locations. As an addition of Rs. 5,57,857/- has already been made to the appellant's income on account of profits earned on unaccounted sales deposited in cash at outstation locations, no separate addition of the 'peak' amounting to Rs. 1,08,000/- is required to be made. Therefore, the addition on account of unexplained cash credits is restricted to Rs.5,57,857/-.”

On a careful consideration and reading of the Ld.CIT(A) order, we do not find any good reason to interfere with the finding of the Ld.CIT(A).

In the result, appeal of the Revenue is dismissed.