2014 (1) TMI 798 - AT - Income Tax

Disclosure of sale proceeds deposited in bank account Held that - No material was found during search to suggest that the impugned receipts are from any other source, then it is natural to infer that the assessee had deposited business receipts only into the Bank A/c - There is no clear evidence to suggest that the assessee deposited the amounts into the account of Andhra Bank from any sources other than business receipts - The assessee s only plea since beginning is that the deposits in the Andhra Bank A/c. represent sale proceeds of the assessee - Unless and until the Department locates any particular source of income, it has to be treated as business receipt of the assessee - The entries found in the Bank A/c. may be assessed as business profit or as income from other sources, as the case may be - There is no rule that the amount credited to the Bank A/c. must be taken as income from other sources - It always depends upon the evidence and explanation furnished by the assessee - It is appropriate to estimate the income at the same rate of net profit as applied to the undisclosed turnover of the assessee i.e., at 15% instead of 100% as considered by the AO Decided in favour of assessee.

Summary

Issues:
- Appeal against CIT(A) order for A.Ys. 2005-06 to 2009-10
- Determination of undisclosed income based on bank deposits
- Consideration of deposits as business receipts or income from other sources

Analysis:
The appeals were filed against the CIT(A) order for multiple assessment years. The appellant contended that the deposits in the bank account represented sale proceeds and profit was declared accordingly. The AO observed that the deposits were not fully considered for income determination, leading to additional income calculations. The CIT(A) upheld the AO's decision, prompting the appellant to appeal.

The key issue revolved around whether the bank deposits should be treated as business receipts or income from other sources. The appellant argued that the deposits were regular business receipts and should not be isolated from business income. On the other hand, the Department insisted that the appellant failed to provide explanations for the nature and source of the deposits. The absence of credible information made it challenging to link the deposits to business receipts.

Despite the search operation at the appellant's premises, there was no clear evidence suggesting sources other than business receipts for the bank deposits. The appellant consistently maintained that the deposits represented sale proceeds. In the absence of specific income sources identified by the Department, the deposits should be considered as business receipts. The Tribunal emphasized that bank account entries could be assessed as business profit or income from other sources based on evidence and explanations provided by the assessee.

Ultimately, the Tribunal concluded that in the absence of evidence indicating other income sources, the deposits were likely business receipts. Therefore, estimating income at 15% of the deposits, reflecting the same rate of net profit applied to undisclosed turnover, was deemed appropriate. Consequently, the appeals were allowed, directing the AO to consider 15% of the bank deposits as income.