2012 (9) TMI 581 - AT - Income Tax

Addition made on account of unexplained cash credits u/s 68 as the assessee failed to prove the source of such deposits in his bank account - assessee claims it to be out of sale proceeds of retail business - return filed u/s 44AF - Held that - Admittedly since the turnover of the assessee is below Rs. 40 lacs, therefore, as per the provisions of section 44AF, the assessee is not expected to maintain books of accounts. The assessee disclosed income of Rs.76,235/- in his return. The impugned amounts were found to be deposited out of the sale proceeds of retail business where the total turnover/sales are to the tune of Rs.13,91,425/-. What documentary evidence can be produced by the assessee from the retail business is always not possible. No other documentary evidence was brought on record by the AO except suspecting the deposits made by the assessee. Therefore, CIT(A) rightly deleted the addition - Decided against Revenue

Summary

Issues:
1. Addition of unexplained cash credits u/s 68 of the Act.
2. Burden of proof on the assessee regarding the source of cash deposits.
3. Interpretation of section 44AF of the Act in relation to maintenance of books of accounts for turnover below Rs. 40 lakhs.

Analysis:
1. The main issue in this case revolves around the addition of Rs.11,86,626/- as unexplained cash credits under section 68 of the Act. The Revenue contended that the assessee failed to prove the source of such deposits in his bank account, leading to the addition. However, the CIT(A) deleted the addition after being satisfied with the explanation provided by the assessee.

2. The burden of proof regarding the source of cash deposits was a crucial aspect of the case. The Assessing Officer doubted the explanation provided by the assessee, stating that no documentary evidence was submitted. However, the CIT(A) observed that the cash deposits were made from the sale proceeds of the retail business. The Tribunal upheld the CIT(A)'s decision, emphasizing that the Assessing Officer did not provide any evidence indicating that the cash deposits did not pertain to the cash sales.

3. Another significant aspect of the judgment involved the interpretation of section 44AF of the Act in relation to the maintenance of books of accounts for turnover below Rs. 40 lakhs. Since the assessee's turnover was below the specified threshold, the Tribunal noted that the assessee was not expected to maintain books of accounts. The Tribunal considered the nature of retail business transactions where producing documentary evidence may not always be feasible, especially when the turnover is relatively low. Consequently, the Tribunal found no justification to interfere with the CIT(A)'s findings and upheld the deletion of the addition.

Conclusion:
The Tribunal dismissed the appeal of the Revenue and the cross objections of the assessee. The decision was based on the totality of facts, including the provisions of section 44AF, the nature of the retail business transactions, and the lack of concrete evidence provided by the Assessing Officer to challenge the source of cash deposits. The judgment reaffirmed the importance of assessing each case based on the available evidence and applicable legal provisions, ultimately leading to the deletion of the disputed addition of unexplained cash credits.