SMT. SANTHOSH DEVI vs. I.T.O. WARD - 5(3),

Brief facts of the case are that the assessee, an individual, deals in textiles. She filed her return of income for the assessment year 2009-10 on 29/09/2009 declaring a total income of Rs.2,25,480/- which includes business income and also income from other sources. During the assessment proceedings u/s 143(3) of the Act, the AO observed that as per AIR information, there were cash deposits into the joint bank account of the assessee and her husband with Standard Chartered Bank, Cunningham Road, Bangalore, to the tune of Rs.55,01,900/- and in the Standard Chartered Bank, Main Road Branch, to the extent of Rs.65,000/-. The assessee was furnished with a copy of the AIR information and was asked to furnish a copy of the said bank account and sources for cash deposits. The Authorized Representative of the assessee filed a copy of the bank statement of the joint account of the assessee and her husband late Jethmal Jain in Standard Chartered Bank where total cash deposit to the extent of Rs.55,01,900/- was made. An affidavit of the assessee conceding that she is not aware of the transaction through this account was also filed and it was stated therein that her name was included by her husband for convenience sake only and that her husband was looking after the business and that he passed away on 9/3/2010 and therefore

Aggrieved, the assessee preferred an appeal before the CIT(A) reiterating the submissions made before the AO and has also filed detailed written submissions stating that the assessee’s husband was doing finance business mainly relating to short- term financing to various textiles business persons located in Chickpet, Bangalore and therefore cash given by various textile customers was being deposited in the bank account for getting supplies through textile mills located in Gujarat. It was stated that the orders for textiles were being placed by assessee’s husband for various small customers in Chickpet and once material was received from textile mills in Gujarat, the same was being supplied to small customers who would pay cash against delivery of materials which were being deposited by the assessee’s husband into the Standard Chartered Bank and the same was also being transferred to various mills through the bank clearing. A copy of the bank account was filed before the CIT(A) in proof of transfer of cash deposits to the mills. It was further stated that the assessee’s husband was getting commission for such transfer which was being offered by him to SP No.118 & Smt. Santosh Devi. Page 4 of 7 income-tax department under PAN AAAHJ9946G and that due to his death on 9/3/2010, the assessee was not in a position to give any details to the AO or the CIT(A) but is in a position to file confirmation letters that the assessee’s husband was in commission business. The CIT(A) called for a remand report from the AO and in the remand report, the AO stated that the present transaction through both joint account and current account in the Standard Chartered Bank undoubtedly prove that the assessee had carried out retail textile business through these two accounts which has not passed through her audited accounts. As regards the cash deposits and cheque transfers from the joint account to the textile mills is concerned, the AO observed that the total amount transferred to the mills is to the tune of Rs.11,75,000/-. He observed that in further investigation, a copy of the bank statement account for the period from 1/4/2008 to 31/3/2009 was obtained from the Standard Chartered Bank which shows similar transactions of cash deposits and subsequent cheques issued to a number of textile business entities. The AO, therefore, held that the business of the assessee through the said two bank accounts has escaped the ambit of taxation and has to be brought to tax. The CIT(A), after considering the assessee’s submissions and the AO’s remand report, held that the assessee herself had done independent business through her own bank account as well as through the joint bank accounts of herself and her husband and that the SP No.118 & Smt. Santosh Devi. Page 5 of 7 belated filing of return of income in the case of the assessee’s husband Shri Jetmal Lalchand in the status of HUF after completion of the scrutiny assessment, betrays the mala fide intention to establish independent retail textile business/commission business carried on by the assessee. Therefore, the CIT(A) held that though benefit has to be granted for purchases, it cannot be denied that this account has not been disclosed in the assessee’s books of account. Therefore, she confirmed the addition made by the AO. Aggrieved, the assessee is in second appeal before us.

In addition to the written submissions filed by the assessee, the assessee has filed additional evidence before us in the form of confirmation letters from various parties stating that they have paid cash to M/s.Nilesh Textiles for purchase of textiles from the assessee. The learned counsel for the assessee, while reiterating the submissions made before the authorities below, stated that the assessee, being only a namesake proprietrix of M/s.Nilesh Textiles, was not aware of transactions of business and that it was the assessee’s husband who was looking after the entire business and on his sudden demise on 9/3/2010, the assessee is not in a position to produce all relevant evidence in support of her claim. He prayed that the additional evidence filed by the assessee before the Tribunal may be admitted and remanded to the file of the AO to enable him to make enquiries as regards purchases made from the assessee and the cash

Having regard to the rival contentions and the material on record, we find that there were cash deposits into the joint bank account of the assessee and her husband and also her individual account. From the remand report of the AO, it is also clear that subsequent to the cash deposit, there were cheque payments to various textile mills invariably and it is to the tune of Rs.11,50,000/-. The account being the joint account of the assessee with her husband, it cannot be presumed that the entire deposits are the income of the assessee alone. The assessee’s contention that the assessee’s husband was doing business and was lending money to textile business persons in Chickpet in Bangalore also has not been verified by the authorities below. Though no books of account are being maintained by the assessee to enable the AO to verify the evidence filed by the assessee before us, we find that at least credit should be given with regard to cheque payments made to various textile mills in Gujarat out of the very same deposits. Therefore, we refuse to admit the additional evidence filed by the assessee and direct the SP No.118 & Smt. Santosh Devi. Page 7 of 7 AO to allow the sum of Rs.11,50,000/- as the business expenditure and to treat only the balance as undisclosed income of the assessee.

In the result, the assessee’s appeal is partly allowed.