2015 (10) TMI 1895 - AT - Income Tax

Unexplained cash deposits in the bank account - CIT(A) deleted 1the addition u/s 68 - Held that - CIT(A) while deleting the addition to the extent of deposits from business has noted that considering the nature of business of Assessee, the receipts of sale proceeds by assessee in cash and the same being deposited in the bank account to be a plausible explanation. Ld. CIT(A) has also noted that Assessee had issued cheques against the cash deposits and cheques were prima faciely issued to the suppliers. With respect to the explanation of the source of deposits of ₹ 2,48,135/- being from agricultural income was also accepted by ld. CIT(A) in view of the fact that Assessee had declared agricultural income of ₹ 2,48,000/- in the return of income and the same was also accepted by the A.O. The explanation of the balance portion of cash deposits of ₹ 1,03,365/- to be out of accumulated savings was also accepted by ld. CIT(A) in view of the fact that Assessee was regularly assessed to tax. Considering the totality of the facts and in view of any contrary material placed on record by Revenue and further as to how the decision relied upon by ld. CIT(A) would not be applicable to the present case, we find no reason to interfere with the order of ld. CIT(A) and thus the ground of Revenue is dismissed. - Decided in favour of assessee.

Summary

Issues:
- Appeal against CIT(A) order for A.Y. 2009-2010.
- Addition of unexplained cash deposits in bank account exceeding gross receipts under section 68 of the I.T. Act.

Analysis:
The appeal was filed by the Revenue against the CIT(A) order for the assessment year 2009-2010. The primary issue revolved around the addition of unexplained cash deposits in the bank account, which exceeded the gross receipts, under section 68 of the Income Tax Act. The Assessing Officer (A.O.) had noted cash deposits amounting to Rs. 36,60,000 in the Assessee's bank account and considered this as undisclosed income due to the lack of satisfactory explanation from the Assessee. However, the CIT(A) granted relief to the Assessee based on detailed analysis and explanation provided by the Assessee.

During the assessment proceedings, the Assessee, engaged in retail business, explained that the cash deposits were from the sale proceeds in the retail business of garments. The CIT(A) acknowledged the nature of the retail business and the practice of receiving cash sale proceeds in such businesses. The Assessee's explanation, supported by the issuance of cheques against cash deposits to suppliers, was deemed plausible. The CIT(A) relied on the provisions of section 44AF of the I.T. Act, presuming a net profit of 5% in retail business, to assess the Assessee's turnover. The CIT(A) accepted the explanation for cash deposits amounting to Rs. 33,08,500.

Furthermore, the Assessee provided a reasonable explanation for the remaining cash deposits of Rs. 3,51,500. A portion of this amount was attributed to declared agricultural income, which was accepted as legitimate. The balance was explained as personal savings, considering the Assessee's regular tax assessments. The CIT(A) found the Assessee's explanations satisfactory, leading to the deletion of the addition of Rs. 36,60,000.

Upon review, the ITAT upheld the CIT(A) decision, emphasizing the plausibility of the Assessee's explanations regarding the source of cash deposits. The ITAT found no reason to interfere with the CIT(A) order, as the Assessee's submissions were supported by evidence and aligned with the nature of the business. The appeal of the Revenue was dismissed, affirming the deletion of the addition of unexplained cash deposits in the bank account.