2017 (1) TMI 1243 - AT - Income Tax

Unexplained/undisclosed income - Held that - We are of the considered view that the assessee might have been disposed-off the opening stock as on 01.04.2005 during the year, therefore, credit of opening stock or sales affected during the year have to be given. Be that as may be, we have to believe that there was sales made during the year. This view is also fortified with the facts that the assessee has shown sales with return of income for the year under consideration. The assessee has been arguing that source of cash deposits is out of sale proceeds and it has been done by her at Indore and by travelling to Haridwar. The two copies of specimen of books published by her also filed by the ld. A.R. showing that she had been earning her livelihood by selling the religious books only. Considering the totality of facts and circumstances, and the facts that the assessee is no more, we have to consider her affidavit as basis of her assertion of facts and return of income filed with department as evidence, therefore, we have to give credit of opening stock and sales shown by her. Accordingly, the source of cash deposits to the extent sales of ₹ 15,00,250/- out of ₹ 17 lakhs is allowed to set off out of sale proceeds and remaining balance amount of ₹ 2 lakh is treated as unexplained/undisclosed income in the hands of the assessee. Therefore, addition of ₹ 15 lakh is deleted and ₹ 2 lakh is upheld. This grounds of appeal is therefore, partly allowed.

Summary

Issues:
Appeal against order of CIT (A)-II Indore for AY 2006-07 - Addition of ?17 lakhs - Compliance with Tribunal's directions - Non-maintenance of books of accounts - Source of cash deposits - Sales substantiation - Affidavit and supporting evidence - Deletion of addition partially.

Analysis:
The appeal was filed against the order of the ld. CIT (A)-II Indore for the assessment year 2006-07, challenging the addition of ?17 lakhs. The grievance primarily revolved around sustaining the addition, purportedly in compliance with the directions of the Hon'ble Tribunal, Indore Bench, despite the assessee's contentions and submission of a notarized affidavit. The Tribunal had set aside the assessment to the file of the A.O. due to contradictions in the assessee's assertions regarding cash deposits and capital introduction. The AO made the addition based on lack of substantiation for sales, expenses, and stock details, despite the assessee's claim that cash deposits were from book sale proceeds.

The assessee contended that the cash deposits were from book sale proceeds and past savings, supported by a detailed affidavit and evidence of book sales. The AR argued that the assessee, a religious book author and publisher, had a legitimate source of income from book sales and had reduced stock levels, indicating sales. The AR also highlighted the higher tax rate voluntarily adopted by the assessee, exempting her from maintaining books under section 44AF. The AR provided a consolidated statement, comparative stock details, and a publisher's certificate to validate the book sales.

The Tribunal found the AO's analysis lacking in considering the sales made by the assessee and disregarding the evidence presented. Despite the absence of maintained books of accounts, the Tribunal accepted the sales shown in the return of income based on the evidence provided. The Tribunal emphasized the credibility of the affidavit and supporting documents, concluding that the cash deposits were largely from legitimate book sales. Consequently, the addition of ?15 lakhs was deleted, while ?2 lakhs were treated as undisclosed income. The appeal was partly allowed based on the credibility of the evidence presented.

In conclusion, the Tribunal's decision was based on the assessee's credible evidence, including the affidavit, consolidated statement, and publisher's certificate, which supported the claim of cash deposits from book sales. The Tribunal upheld the principle of accepting documented evidence in the absence of maintained books of accounts, resulting in the partial deletion of the addition and acknowledgment of legitimate income sources.