BRIJMOHAN P. RATHI,MUMBAI vs. ITO - 32(1)(3), MUMBAI

The assessee filed his return of income declaring a total income of Rs.1,33,820/- in AY 2010-11 consisting of salary, commission and other sources income. The AO received information that the assessee has made cash deposits aggregating to Rs.19,69,755/- into his bank account. When questioned, the assessee submitted that he was carrying on retail trade in fabrics and the deposits represent sale proceeds of the business. He further submitted that he has also deposited cheques/transfer deposits aggregating to Rs.7,38,895/- and the said deposits also represents sale proceeds of fabrics. Since the assessee did not substantiate the said claim, the AO assessed aggregate amount of Rs.27,08,732/- as income of the assessee. Before the AO the assessee requested to assess 5% of the Rs.27,08,732/- as income of the assessee as per

The Ld A.R submitted that the assessee has furnished certain purchase bills and also obtained confirmation from M/s Parshwanath Fabrics regarding purchase of fabrics to the extent of Rs.15.65 lakhs. Accordingly he submitted that the assessee has proved majority of purchases. He submitted that the assessee’s claim has not been accepted by the tax authorities mainly for the reason that the assessee did not declare the business activities in the return of income. Since the assessee was doing retail sales, he could not furnish the names of the parties to whom the goods were sold. Accordingly he submitted that a reasonable income may be estimated from the deposits made by the assessee.

On the contrary, the Ld D.R submitted that the assessee has failed to prove that the deposits represent sale proceeds. Further the assessee has come forward with the above said explanation after its detection by the AO.

I have heard rival contentions and perused the record. I notice that the assessee has obtained confirmation letter for the purchase value of Rs.15.65 lakhs from a party named M/s Parshwanath Fabrics. The said party has also furnished copy of its returns. I notice that the AO has not brought any material on record to show that the said confirmation letter was wrong. Since the assessee has proved part of purchases, it would be reasonable to presume that the assessee was carrying on business activities. However, with regard to the cheque deposits and transfer deposits, the explanation of the assessee that the same also represent sale proceeds of fabrics is difficult to accept. Had it been the case, the assessee should have been in a position to give the name and 3 Mr. Brijmohan P Rathi addresses of the customers, confirmation from customers etc. Since the business activities has been accepted, it may be reasonable to presume that the cheque deposits/transfer deposits may also represent proceeds from some other business activities. Under these set of facts, I am of the view that this issue may be settled by estimating income from the deposits. Accordingly I direct the AO estimate the income at 10% of cash amount of deposits and at 20% in respect of cheque amount of deposits. I order accordingly. The order passed by Ld CIT(A) would stand modified accordingly.

In the result, the appeal of the assessee is partly allowed. Order has been pronounced in the Court on 3.5.2017.