ELCY GEORGE IRUMALA,NAVI MUMBAI vs. ITO 23(3)1, MUMBAI

Briefly stated the facts are, assessee an individual claimed to have carried on business in re–selling / retailer of refilling of fire extinguisher and hydrant services. For the assessment year under 2 Elcy George Irumala consideration, assessee filed her return of income on 26th February 2010, declaring total income of ` 1,48,660. In the course of assessment proceedings, on the basis of AIR information, the Assessing Officer found that assessee had made cash deposit of ` 16,91,963 in her saving bank account in South India Bank Ltd. However, the assessee has not shown the bank account in her Balance Sheet. He, therefore, called upon the assessee to explain the reason for not doing so. In response to the query raised by the Assessing Officer, it was submitted, out of the deposits made in the bank account an amount of ` 9 lakh received in cheque represents temporary loan taken from M/s. Process Construction for payment of foreign education expenses of sister, which was also re–paid during the relevant financial year. As far as the balance deposits are concerned, it was submitted, they represent the business receipts of the assessee, hence, applying the provisions of section 44FF, net profit should be estimated @ 5%. The Assessing Officer, however, did not accept the submissions of the assessee. He alleged that to prove the fact that similar business was also carried on in immediately preceding assessment year and cash depsoits were also made in the bank account, the assessee did not submit the copy of bank statement. Accordingly, he treated the cash deposit of ` 16,91,963 as income from unexplained source. He further noticed that the amount of ` 2,65,760 credited to the saving bank

The first appellate authority after considering the submissions of the assessee was of the view that as the assessee has not disclosed the bank account in the Balance Sheet, the cash deposit made therein during the relevant previous year has to be treated as undisclosed income of the assessee under section 69 of the Act. However, he was of the view that peak of such cash deposits has to be considered for addition and accordingly worked out the peak of cash deposit at ` 11,85,760, as on 7th May 2008 and considered it for addition as against the amount of ` 16,91,963, made by the Assessing Officer.

Learned Authorised Representative submitted, while working out the peak of cash deposit, learned Commissioner (Appeals) has not reduced the amount of ` 9 lakh received through cheque as temporary loan. It was submitted, if the cheque deposit of ` 9 lakh is reduced the amount which will remain for addition is ` 2,65,760. To impress upon

Learned Departmental Representative, on the other hand, relied upon the order of the learned Commissioner (Appeals).

We have considered the submissions of the parties and perused the material available on record. Undisputedly, Department has not come in appeal against the order of the learned Commissioner (Appeals). Therefore, it has to be assumed that Department has no grievance against the decision of the learned Commissioner (Appeals) that addition of the peak of the cash deposits has to be made. It is evident from the order of the learned Commissioner (Appeals) that he has taken the peak of cash deposit of ` 11,85,760 as on 7th May 2008. However, on a perusal of the bank statement submitted before us, we find that the deposit of ` 11,85,760, as on 7th May 2008, includes cheque deposit of ` 9 lakh, claimed to be temporary loan received from M/s. Process Construction. Therefore, in our view, assessee’s claim that such amount cannot be considered for working out the peak of cash deposit merits consideration. As the learned Commissioner (Appeals) has failed to consider the aforesaid aspect, we are inclined to restore the matter back to the file of the learned Commissioner

In the result, assessee’s appeal is allowed for statistical purposes. Order pronounced in the open Court on 04.03.2016