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Facts
The assessee, a joint venture, did not file its return for AY 2017-18 as its business had stopped. The AO made additions based on cash deposits and credit entries, estimating income at 8% of Rs. 67,91,980/-. The CIT(A) deleted cash deposit additions but upheld the estimation of income.
Held
The Tribunal held that the cash deposits of Rs. 22,99,000/- pertained to the previous assessment year and no addition could be made. Regarding credit entries of Rs. 45,01,980/-, the assessee's claim of short-term capital loss from the sale of assets in the previous year was supported.
Key Issues
Whether the estimation of income at 8% on total cash and credit entries was justified when cash deposits pertained to the previous year and credit entries represented sale of assets resulting in capital loss.
Sections Cited
250, 144, 141(1)
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Before: SHRI SANDEEP SINGH KARHAIL & SMT. RENU JAUHRI
Appellant by : Shri Rahul Hakani Respondent by : Shri R. R. Makwana Date of Hearing 08.08.2024 Date of Pronouncement 07.10.2024 आदेश / O R D E R PER RENU JAUHRI [A.M.] :- This appeal is filed by the assessee against the order of the Learned Commissioner of Income-tax (Appeals), Mumbai-30/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] dated 13.02.2024 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Year [A.Y.] 2017-18.
A.Y. 2017-18 Bhumika Transport JV BNRA
The assessee has raised following grounds of appeal: a. “The Learned CIT(A)/NFAC erred in making addition of Rs 5,43,358/- being 8% of Rs 67,91,980/- without appreciating that Rs 67,91,980/- do not represent any taxable revenue receipt and hence the addition of Rs 5,43,358/- may be deleted.”
3. Brief facts of the case are that the assessee is a joint venture with four members formed in the year 2011 for carrying out works of municipal solid waste management in Bhiwandi, district Thane. The assessee did not file its return of income for AY 2017-18 for the reason that the work was stopped due to differences and disputes among the JV members in the preceding year. The assessee had made huge cash transactions during the demonetization period in its bank account due to which a notice u/s 141(1) was issued on 28.08.2019 requiring it to explain the source and nature of all the cash deposits. The assessment was finalized u/s 144 after making the following additions: a. Rs. 22,90,000/- cash deposits in the bank account b. Rs. 3,60,158/- @8% of credit entries of Rs. 45,01,980/-
4. During appeal, the assessee explained that there was no income during the year and credit entries represented amounts recovered from the debtors on account of sale of plant & machinery i.e. the vehicles.
5. Vide order dated 13.02.2024, Ld. CIT(A) deleted the additions of cash deposits of Rs. 22,99,000/-. However, he estimated income @8% of total cash and credit entries amounting to Rs. 67,91,980/-
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Before us, the only ground of appeal
relates to estimation of income @8% of Rs. 67,91,980/-. The Ld. AR submitted that the business of the assessee had stopped in the earlier year, as such, there was not trading or any other activity during the year under consideration. Moreover, the cash deposits of Rs. 22,99,000/- pertain to previous assessment year and no addition can be made in the current year by estimation of income out of these deposits. Further, there is no dispute regarding the fact that the total amount of Rs. 54,01,980/- credited in the bank account represents recovery from debtors on account of sale of vehicles which were sold on ‘as is where is’ basis in the preceding assessment year, resulting in short term capital loss, but amount due from purchasers was received in current assessment year.
7. We have heard the rival submissions and examined the material available before us. Clearly, the cash deposits amounting to Rs. 22,99,000/- pertain to previous assessment year i.e. AY 2016-17. As such, no addition can be made by estimating income embedded in these deposits. With regard to credit entries amounting to Rs. 45,01,980/-, the assessee’s claim regarding short term capital loss during AY 2016-17 is supported by the copy of return for AY 2016-17 placed before us. The assessee has shown short term capital loss amounting to Rs. 3,26,06,355/- from the sale of depreciable assets while filing the return for AY 2016-17 at nil income on 29.03.2017.
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In view of above, we find that there is no reason to make any addition in the hands of the assessee during the year under consideration.
In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 07.10.2024.
Sd/- Sd/- SANDEEP SINGH KARHAIL RENU JAUHRI (न्यातयक सदस्य/JUDICIAL MEMBER) (लेखाकार सदस्य/ACCOUNTANT MEMBER)
Place: म ुंबई/Mumbai दिनाुंक /Date 07.10.2024 अननकेत स ुंह राजपूत/ स्टेनो आदेश की प्रतितलति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file.
सत्यावपि प्रवि //True Copy// आदेशानुसार/ BY ORDER, उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीलीय अतिकरण/ ITAT, Bench, Mumbai.
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