2017 (4) TMI 294 - AT - Income Tax

Unexplained cash credit under section 68 - whether the cash deposits in bank account are the sales receipt of the business carried on by the assessee - Held that - This issue has been examined by the Tribunal in assessment year 2009-10 in view of the facts that the assessee was not having any sales tax or VAT number or any details of purchaser or seller etc. We have observed that all those facts are in existence in the year under consideration also. Therefore, the issue that the income declared in the year under consideration is under presumptive scheme of taxation, is not relevant for deciding issue in dispute raised in grounds before us. If the assessee has not complied the provision of section 44 AF of the Act, then there are other measures under the Act available before the Assessing Officer. Further, the issue whether the return of income was defective or not, cannot be racked before us at this stage after accepting the return of income and completing the assessment. Further, the contention of the Ld. DR that money was deposited in bank account at outstations, itself shows that the amount deposited in Bank account, cannot be the assessee s own money alleged to be routed through bank account . In view of above, we do not find any error on the part of the Ld. CIT-A to have followed the order of the Tribunal for assessment year 2009-10. The Ld. DR has also contended that apart from the trading addition, the Ld. CIT-A ought to have examined the issue of unexplained investment as this was the first year of bank account which was not the case for AY 2009-10. However, in absence of any ground or any material to support the above contention, we reject the same. - Decided against the revenue.

Issues Involved:
1. Whether the deposits of ?55,59,989/- were unexplained credits or represented trading receipts.
2. The right of the appellant to amend, modify, alter, add, or forego any grounds of appeal.

Issue-Wise Detailed Analysis:

1. Whether the deposits of ?55,59,989/- were unexplained credits or represented trading receipts:

The primary issue in this case was whether the deposits amounting to ?55,59,989/- in the assessee's bank account were unexplained cash credits under Section 68 of the Income-tax Act, 1961, or if they represented trading receipts. The assessee initially filed a return of income declaring a total income of ?3,46,100/-, which included salary, capital gain, and interest income. The case was reopened under Section 147 of the Act due to the discovery of significant deposits in the assessee's bank account that were not justified by the declared income.

In response to the reopening, the assessee filed a revised return declaring a total income of ?6,24,000/-, including a net profit of ?2,78,000/- from the alleged trading activity. The Assessing Officer (AO) rejected this claim, citing the absence of supporting evidence such as sales tax/VAT numbers, details of parties involved in the transactions, and proof of freight/cartage. Consequently, the AO treated the deposits as unexplained cash credits under Section 68.

On appeal, the Commissioner of Income-tax (Appeals) [CIT-A] followed the precedent set by the Income Tax Appellate Tribunal (ITAT) for the assessment year 2009-10, where similar deposits were held to represent trading receipts. The CIT-A directed the AO to compute the income at a rate of 5% of the total receipts, resulting in a taxable income of ?2,77,999/-, and deleted the balance addition of ?52,81,990/-.

The Revenue contested this decision, arguing that the facts for the year under consideration were not identical to those of the previous year. The Department contended that the nature and quantum of deposits and withdrawals were not furnished, and the claim of trading receipts was an afterthought without supporting evidence. Additionally, the Revenue pointed out that the bank account used in the current year was different from the one considered in the previous year, and the assessee had filed the return under the presumptive scheme of Section 44AF.

The assessee's representative countered these arguments by stating that the facts and circumstances were indeed identical to those of the previous year, and the same bank account was under consideration. The representative also noted that all relevant facts were submitted during the assessment and appellate proceedings for both years.

The ITAT, after reviewing the submissions and material on record, upheld the CIT-A's decision. The Tribunal found no significant differences in the facts and circumstances between the assessment years 2009-10 and 2008-09. The ITAT cited its previous decision, which concluded that the deposits represented trading receipts from the assessee's business activities. The Tribunal also noted that the Revenue had not provided any material evidence to contradict this finding.

2. The right of the appellant to amend, modify, alter, add, or forego any grounds of appeal:

The second ground raised by the Revenue was a general one, reserving the right to amend, modify, alter, add, or forego any grounds of appeal. The ITAT did not find it necessary to adjudicate on this ground as it was general in nature and did not require specific consideration.

Conclusion:

The ITAT dismissed all three appeals by the Revenue, affirming the CIT-A's decision to treat the deposits as trading receipts and compute the income at a rate of 5% of the total receipts. The Tribunal found no error in the CIT-A's reliance on the precedent set for the assessment year 2009-10 and rejected the Revenue's arguments regarding the differences in facts and circumstances between the assessment years. The decision was pronounced in the open court on 31st March 2017.

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