ITO 21(3)(5), MUMBAI vs. YASEER ABDUL HAFIZ, MUMBAI

Brief facts are, the assessee an individual is engaged in the business of cosmetics and general merchandise. For the assessment year under dispute, the assessee filed his return of income on 29th July 2011, declaring total income of ` 3,80,500. In the course of assessment proceedings, the Assessing Officer found that as per AIR information available on record, the assessee had deposited cash of ` 35,05,700 in a savings bank account with Kotak Mahindra Bank in the relevant previous year which was not disclosed in the return of income. Therefore, the Assessing Officer called upon the assessee to explain the source of cash deposits and furnish copy of the bank statement and supporting evidence. In response, the assessee vide letter dated 12th December 2013, submitted that proceeds from the business of cosmetic and general merchandise amounting to ` 42,68,810, were deposited in the bank account and, since, the turnover is less than ` 60 lakh applying the provisions of section 44AD, the assessee has computed his income, though, inadvertently he has offered the income under the head income from other sources. The 3 Shri Yaseer Abdul Hafiz Reshamwala Assessing Officer, however, was not convinced with the explanation of the assessee. He observed, the assessee has filed his e–return of income in ITR–2, wherein, there is no provision for declaring business income under section 44AD. He also observed, the assessee has not declared in the return of income in the bank account wherein cash was deposited. Accordingly, the Assessing Officer treated the cash deposit of ` 42,86,010 in the bank account as unexplained investment and added back to the income of the assessee. Being aggrieved of the addition made, assessee preferred appeal before the first appellate authority.

The learned Commissioner (Appeals) after considering the submissions of the assessee deleted the addition by observing as under:–

We have heard rival contentions and perused the material available on record. As could be seen, the Assessing Officer has treated the cash deposits in the bank account as the unexplained investment of the assessee basically for the reason that the assessee has filed his return of income in ITR–2 wherein there is no option for offering income under section 44AD. Further reason for rejecting assessee’s claim is, assessee offered his income under the head income from other sources. However, on a perusal of the facts on record as well as from the finding of the first appellate authority it is evident that the cash deposits in the bank account are from his cosmetic and merchandise business. In fact, the Assessing Officer in the preceding assessment year i.e., 2010–11, has accepted the aforesaid claim of the assessee. Therefore, we do not find any reason to interfere with the order of the learned Commissioner (Appeals). However, we make it clear that this decision of ours is on the basis of facts involved in the impugned assessment year, hence, cannot be considered as a precedence. Further, we may observe, the assessee should not take advantage of his ignorance by repeatedly committing the same mistake. If he intends to avail the benefit of the presumptive

In the result, Revenue’s appeal is dismissed. Order pronounced in the open Court on 04.12.2017