2017 (9) TMI 1848 - AT - Income Tax

Unexplained cash deposits - unexplained income of assessee - HELD THAT - On perusing the ledger account of Induslnd Bank, we find that whenever the cash was deposited, it was immediately transferred to M/s. Shri Krishna Cargo. Therefore, the contentions that the same forms part of the business receipts cannot be brushed aside lightly. The assessee has not furnished any detail in support of its claim of business receipts. In our considered opinion and considering the manner in which the cash was deposited and transmitted to the firms account, 50% of the cash deposited should be treated as the income of the assessee. We modify the findings of the ld. CIT(A) and direct the A.O. to treat 50% of the cash deposited as undisclosed income of the assessee. Appeals of the Assessee partly allowed

Summary

Issues:
Two separate appeals by the Assessee against orders of Ld. CIT(A)-10 & Ld. CIT(A)-5 for A.Ys. 2011-12 & 2012-13, common facts in both appeals, treatment of cash deposits in bank account, explanation by Assessee regarding source of cash, contention of business receipts, modification of findings by ITAT.

Analysis:
The ITAT Ahmedabad heard two separate appeals by the Assessee against orders of Ld. CIT(A)-10 & Ld. CIT(A)-5 for A.Ys. 2011-12 & 2012-13, respectively. As the facts were common in both appeals, they were heard together and disposed of by a common order for convenience. The Assessee was confronted during scrutiny assessment regarding cash deposits in a bank account and asked to explain the sources of the cash deposited. The Assessee claimed the cash belonged to a firm where he was a partner, raised through unsecured loans to meet liquidity requirements, and immediately transferred to the firm. However, the AO found this explanation unsubstantiated and made additions to the income. The Assessee's appeal before the CIT(A) was unsuccessful.

During the ITAT hearing, the Assessee presented a new argument that the money deposited was from business done outside the books, suggesting only profit should be added. The Assessee pointed out the immediate transfer of cash to the firm's account. The DR supported the AO's findings. The ITAT acknowledged the cash deposits and the Assessee's unsubstantiated explanation. However, upon reviewing the bank ledger, it noted the immediate transfer to the firm's account, indicating a business connection. Despite lack of detailed support for the business receipts claim, the ITAT concluded that 50% of the cash deposited should be treated as the Assessee's income. The ITAT modified the CIT(A)'s findings and directed the AO to treat 50% of the cash as undisclosed income. As a result, the Assessee's appeals were partly allowed by the ITAT.