MILAN V. SHAH,MUMBAI vs. ITO 22(1)(3), NASHIK

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ITA 5539/MUM/2015Status: DisposedITAT Mumbai07 November 2016AY 2010-113 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that while the deposits might represent business transactions, it was not proper to assess the entire receipts as income. Instead, the income arising from these transactions should be estimated.

What were the facts?

The Assessing Officer reopened the assessment of the assessee, who had not filed a return, upon receiving information about substantial deposits in a savings bank account. The AO assessed the entire deposits as income under Section 68.

What were the issues?

Whether the entire unexplained bank deposits can be assessed as income under Section 68, or if income from business transactions should be estimated.

Which sections of the Income-tax Act were involved?

Section 68,Section 131

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” Bench, Mumbai

Before: Shri B.R. Baskaran (AM) & Shri Pawan Singh (JM)

For Appellant: Shri Devendra Jain
For Respondent: Shri C.W. Angolkar
Hearing: 7.11.2016Pronounced: 7.11.2016

The appeal filed by the assessee is directed against the order dated 8.9.2015 passed by the learned CIT(A)-25, Mumbai and it relates to A.Y. 2009- 10. The assessee is aggrieved by the decision of the learned CIT(A) in partially confirming the addition made by the Assessing Officer u/s. 68 of the Act.

2.

We heard the parties and perused the record. The Assessing Officer received information that the assessee has deposited a sum of ` 13,40,000/- in aggregate in the savings bank account maintained with Union Bank of India. It was noticed that the assessee has not filed return of income for the year under consideration and hence the Assessing Officer reopened the assessment and assessed total deposits of ` 13,50,323/- as income of the assessee u/s. 68 of the Act.

2 Milan V.Shah

3.

In the appellate proceedings the learned CIT(A) took the view that the peak of the credit has to be assessed as income. Accordingly he directed the Assessing Officer to assess a sum of ` 6,20,000/-as income of the assessee u/s. 68 of the Act. Thus he gave partial relief to the assessee. Still aggrieved, the assessee has filed this appeal before us.

4.

From the perusal of the orders passed by the tax authorities, we noticed that the assessee has explained sources to be the opening balance cash available with him and business receipts. We noticed that the learned CIT(A) rejected the claim of opening cash balance but accepted that these deposits may represent undisclosed business transactions of the assessee. We noticed that the Assessing Officer has recorded a statement on oath u/s. 131 of the Act and the assessee has submitted that he has acted as an agent in respect of fast moving consumer goods. Under these set of facts, we are of the view that the Ld CIT(A) was justified in observing that the deposits made by the assessee in the bank account may represent business transactions. Once it is accepted as business receipts, it may not be proper to assess entire receipts as income of the assessee and instead, the income arising from the transactions may be estimated. Since the assessee has claimed to have acted as agent, we are of the view that the income may be estimated @ 10% of the aggregate amount of deposits made in the bank account of the assessee and in our view, the same would meet the ends of justice. Accordingly, we set aside the order passed by the learned CIT(A) and direct the Assessing Officer to assess 10% of the aggregate amount of deposits as income of the assessee.

5.

In the result, appeal filed by the assessee is treated as partly allowed.

Order has been pronounced in the Court on 7.11.2016

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