2014 (1) TMI 1638 - AT - Income Tax

Disallowance u/s 69 - unexplained cash deposit - Non maintenance of books of accounts - held that - Assessee has declared total gross turnover of 25, 56, 850/- and in the absence of books of account the AO estimated the total receipts at 30 lacs in the assessment order and did not accept the applicability of provisions of section 44AD of the IT Act being the nature of business of the assessee to be different. The AO directed to apply 10% profit rate and directed to make addition of 95, 492/-. The AO similarly made addition of 16, 94, 500/- being the amount deposited in the bank account and since it was a larger amount therefore no addition on account of gross profit was made. These facts clearly show that the amount deposited in the bank account of the assessee was part of the total turnover which was enhanced to 30 lacs from the turnover disclosed by the assessee in the absence of the production of books of account. The ld. CIT(A) was therefore justified in holding that the addition on account of unexplained bank deposits is unjustified and the addition on account of applying reasonable profit rate has to be made - No merit in appeal - Decided against Revenue.

Summary

Issues:
Challenging deletion of addition of Rs. 16,94,500 made by AO under section 69 of IT Act on account of unexplained cash deposit in bank account.

Analysis:
The appellant, engaged in the business of supplying material and machinery for civil construction work, declared income under section 44AD of IT Act. However, AO rejected this claim, adding Rs. 16,94,500 of bank deposits to the income. The appellant argued that the deposit was less than the turnover, hence unjustified. The CIT(A) agreed, directing to apply a reasonable profit rate instead. The AO was instructed to add Rs. 95,452, the difference between declared and computed profit. The remaining addition was deleted, partially allowing the appeal.

The ITAT considered the submissions of both parties. The appellant cited a previous case where bank deposits were explained as sale proceeds, supporting their claim. The bank account details showed deposits matching payments to traders, indicating a commission-based business. The ITAT found the addition of Rs. 31,62,300 unwarranted, suggesting a profit rate be applied instead. The CIT(A)'s decision was upheld, as the bank deposits were part of the turnover, justifying the deletion of the addition. The ITAT dismissed the departmental appeal, affirming the CIT(A)'s findings.

In conclusion, the ITAT upheld the CIT(A)'s decision to delete the addition of unexplained bank deposits, emphasizing the turnover and profit rate application. The departmental appeal was dismissed, and the order was pronounced in open court.