MOSES DOMINIC FERREIRA,MUMBAI vs. ITO WD 24(2)(4), MUMBAI

In this appeal, the assessee is aggrieved for addition of Rs.8,24,379/- in respect of cash deposited in the bank account and for addition of Rs.4,67,970/- being cheque deposited in the bank account. The addition was made by AO u/s.68 of I.T.Act.

Rival contentions have been heard and record perused. Facts in brief are that assessee is a trader of building material. For the year under consideration assessee filed his return at income of Rs.1,70,972/-. The case was proceeded u/s.143(1) and thereafter selected for scrutiny by issue of notice u/s.143(2) of the Act. During the course of scrutiny assessment the AO observed that assessee has made cash deposits to the tune of Rs.11,17,500/- in his savings bank account maintained at Citizen Credit Cooperative Bank, Manori Branch, Mumbai. The AO also observed that apart from cash deposits there were certain credits on account of receipts of cheques. The AO further stated that in respect of deposit of cash in the bank account, the assessee explained the source of such cash in the cash book by way of cash sales. As regards payment to certain parties, the assessee shown such payments as withdrawal in their names in the cash book. The AO further observed that though the assessee through his cash book tries to tally the cash deposits in the bank account, which is by way of cash sales, however, in respect of amounts paid by the assessee on various dates to the aforesaid parties as well as transfer of funds into the account No.CD-17, the assessee failed to prove the same having been part of his withdrawals. Accordingly addition of Rs.8,24,379/- and Rs.4,67,970/- was made u/s.68 on account of cash and cheque deposited in the bank account.

By the impugned order CIT(A) confirmed the addition, against which the assessee is in further appeal before us.

It was argued by ld. AR that assessee is engaged in the business of retail trading of building material, since the turnover of the assessee was below taxable limit i.e. Rs.40 lakhs under presumptive tax scheme, the assessee is required to declare profit at 5% of the gross receipts u/s.44AF. Therefore, the AO was not justified in making addition in respect of entire deposits of cash and cheque in the bank account. He further drew our attention to the cash account and bank account indicating deposit in of cash into the bank out of cash available in the cash book either through withdrawals from the very same bank account or cash receipts on account of cash sales. It was vehemently argued that assessee has explained each and every deposit of cash and cheque in the bank account as well as its source as per the bank statement placed on record along with narration indicating source of payment.

Ld. AR also relied on the decision of Hon’ble Delhi High Court in the case of Lovish Oberoi, 54 taxmann.com 23(Delhi) in support of the proposition that assessee engaged in civil construction business, profit can be computed at 8% of the gross receipt u/s.44AD in place of profit of 25% taken by the AO. It was further contended by ld. AR even in the subsequent year assessee has offered profit u/s.44AF and the same has been accepted by the department. It was, therefore, contended that even during the year under consideration, addition should be confined to the profit arrived at u/s.44AF.

On the other hand, ld. DR relied on the order of lower authorities.

We have considered rival contentions, carefully gone through the orders of authorities below as well as documents placed on record. We found that assessee is a trader of building material, during the year assessee deposited cash and cheques in the bank account in respect of sales effected by it. Cheques were also issued out these bank account in respect of materials purchased by it. However, only profit earned on sales is income of assessee and not the amount of cash and cheques deposited in the bank account. The AO found that assessee has deposited cash of Rs.11,17,500/- in SB account No.219 and Rs.9,32,200/- in Account No.CD-17. We found that there is also deposit of cheque of Rs.4,67,970/- in SB Account No.219 and Rs.2,14,150/- in CD -

It is not in dispute that assessee being a retail trader covered by the provisions of Section 44AF, therefore, required to declare its profit @5% of the total sales. Even if it is presumed that amount of cash and cheques deposited in the bank account was only on account of sales, we found that total such cash and cheques deposited in both the bank account i.e. SB account No.219 and account No.CD-17 along with their opening and closing balance works out to be Rs.27,41,521/-. Under the provisions of Section 44AF the assessee is required to declare profit of 5% on the gross sales. Considering the totality of facts and circumstances, we restrict the addition to the extent of 5% of Rs.27,41,520/- which works out to Rs.1,37,076/-. Accordingly, we direct the AO to restrict the addition to the extent of Rs.1,37,076/- as against the addition made by him.

In the result, appeal of the assessee is allowed in part. Order pronounced in the open court on this 29/04/2016. (PAWAN SINGH) (R.C.SHARMA) न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER भुंफई Mumbai; ददनांक Dated 29/04/2016 प्र.कु.मभ/pkm, नन.स/ PS आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : अऩीराथी / The Appellant 1. प्रत्मथी / The Respondent. 2. आमकय आमुक्त(अऩीर) / The CIT(A), Mumbai. 3. आमकय आमुक्त / CIT 4. ववबागीम प्रनतननधध, आमकय अऩीरीम अधधकयण, भुंफई / DR, ITAT, Mumbai 5. गार्ा पाईर / Guard file. 6. सत्मावऩत प्रनत //// आदेशाि सार/ BY ORDER,