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Facts
The assessee, an individual engaged in trading onions and potatoes, filed its return of income after receiving a notice under section 148. The AO brought to tax entire cash deposits of Rs. 57,12,900/- as undisclosed income, despite the assessee claiming these were business-related purchases. The assessee claims to earn 8-10% from this business.
Held
The Tribunal noted that the bank accounts showed both deposits and withdrawals, indicating business activity. Even though the assessee declared 10% income in subsequent years, and section 44AD provides for 8% income, the AO was directed to assess income at 10% of total cash deposits in the interest of justice.
Key Issues
Whether the AO was justified in treating entire cash deposits as undisclosed income without considering business expenses and the nature of business? Whether the assessee should be directed to prove his business, and if so, how should the income be estimated?
Sections Cited
148, 143(1), 44AD
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Income Tax Appellate Tribunal, CUTTACK BENCH CUTTACK
Before: SHRI GEORGE MATHAN & SHRI MADHUSUDAN SAWDIA
("नधा"रण वष" / Assessment Year : 2016-2017) Vs ITO, Ward-1, Bolangir Hrudananda Sahu, At-Lachut, Saintala, Bolangir-767032 PAN No. :MPOPS 7342 C (अपीलाथ" /Appellant) .. (""यथ" / Respondent) "नधा"रती क" ओर से /Assessee by : Shri Jagamohan Pattanaik, Advocate राज"व क" ओर से /Revenue by : Shri Vijay Singh, Sr. DR सुनवाई क" तार"ख / Date of Hearing : 18/02/2026 घोषणा क" तार"ख/Date of Pronouncement : 18/02/2026 आदेश / O R D E R Per Bench : This is an appeal filed by the assessee against the order of the Ld.CIT(A), National Faceless Appeal Centre (NFAC), Delhi, dated 15.10.2025 for the assessment year 2016-2017.
It was submitted by the Ld.AR that the assessee is an individual, who is doing trading in onion & potato. It was submission that during the course of assessment, the AO had issued notice u/s.148 of the Act and the assessee had filed its return of income. There was a deposit in the bank account of the assessee to an extent of Rs.57,12,900/-. It was submission that the AO brought to tax the entire cash deposits of Rs.57,12,900/- as the undisclosed income of the assessee. It was submission that the assessee had also made purchases through the bank account and the same were through transfers to the suppliers of the onions and potatoes. It was 2 submission that the assessee has been earning 8 to 10% from his business. It is the prayer that the income of the assessee may be estimated.
In reply, the ld. Sr. DR submitted that the assessee has not proved that he is a dealer in onions and potatoes. It was submission that the assessee should be directed to prove his business.
In reply, the Ld. AR submitted that in subsequent years also the assessee has been filing his return from its dealing in potatoes and onions and though no scrutiny assessment has been done, the returns have been accepted under section 143(1) of the Act.
We have considered the rival submission. A perusal of the paper book filed by the assessee, most specifically the copy of the bank accounts shows that there are both deposits and withdrawals from the said bank accounts. Clearly this is the business activity of the assessee. When there are both credits and withdrawals from the bank account, obviously in the worst case scenario would be to assess the peak credits. Even the provisions of section of 44AD of the Act provides for assessing the income at 8%. This being so, as the assessee has been declaring an income of 10% for the subsequent years, in the interest of justice, the AO has directed to assess the income of the assessee at 10% of the total cash deposits.
In the result, appeal of the assessee is partly allowed. Order dictated and pronounced in the open court on 18/02/2026. (MADHUSUDAN SAWDIA) (GEORGE MATHAN) लेखा सद"य/ ACCOUNTANT MEMBER "या"यक सद"य / JUDICIAL MEMBER "दनांक Dated 18/02/2026 Prakash Kumar Mishra, Sr.P.S.