VIKRAM SINGH NEGI,ALMORA vs. ITO, WARD-2(3)(3), ALMORA

The grievance of the assessee read as under :-

Briefly stated the facts of the case are that the assessee electronically filed his return of income declaring total income of Rs.138480/-. The return was subsequently selected for scrutiny assessment through CASS. Accordingly statutory notice u/s. 143 (2) of the Act was served upon the assessee.

During the course of the scrutiny assessment proceedings, inter-alia the assessee was asked to explain the source of cash deposited in the bank accounts of UCB Almora and SBI Ranikhet UCB Ranikhet. On receiving no plausible reply the AO made the addition of Rs.2037749/-.

Assessee agitated the matter before the CIT(A) and explained that a cash flow statement was furnished during assessment proceedings wherein it was clear that all the deposits were out of withdrawals made by the assessee and, therefore, the same cannot be termed as unexplained. The submissions of the assessee did not find any favour with the CIT(A) who was of the firm belief that the turnover of the assessee does not justify the cash deposited in the bank accounts. However, considering the turnover of the assessee the CIT(A) restricted the disallowance to the extent of Rs.1528494/-.

Before us the Counsel for the assessee vehemently stated that the assessee is in the business of Civil Contract work and the cash deposited in the bank is out of its contract receipts. When the Bench asked the Counsel how he would justify the contract receipts shown in the return of income to which the Counsel replied that if given an opportunity he will explain to the Assessing Officer to the satisfaction of the AO.

Per contra the DR strongly supported the findings of the AO. It is the say of the DR that the assessee himself has filed return of income u/s.44AD and, therefore, the contract receipts as mentioned by the assessee does not match with the deposits made in the bank account.

We have given a thoughtful consideration to the orders of the authorities below. It is not in dispute that the assessee is in the business of Civil Contract Work. It is also not in dispute that the assessee has filed his return of income under presumptive taxation of 8% u/s. 44AD of the Act. However, it is the say of the Counsel that the deposits are out of contractual receipts cannot be brushed aside lightly. In the interest of justice we restore this issue to the files of the AO. The assessee is directed to demonstrate by bringing cogent material evidences on record to justify the contractual receipts are the source of deposits in the bank account. The AO is directed to verify the same and if found correct the same may be taxed as per the relevant provisions of the Act after affording a reasonable and sufficient opportunity of being heard to the assessee.

In the result, the appeal is allowed for statistical purpose.

Decision announced in the open court on 22.08.2022.