2018 (2) TMI 1577 - AT - Income Tax

Addition towards unexplained cash deposit in bank - estimation of net profit rate - Held that - Perusal of the credit entries in the bank account of Shri Kailalsh Singh reveals that regular account payee cheques have been credited in the bank account of Shri Kailalsh Singh which are on account of contract /business receipts for road construction. This proves that the cash withdrawal by the assessee is out of the business receipts of Shri Kailalsh Singh. These business receipts of Shri Kailalsh Singh shown in the bank statement are 4 taxable only to the extent of profit earned from the road construction business - we assume that the alleged cash deposits made by the assessee are also the part of business/ contract receipts. Certainly when the business receipts are towards road construction business only the profit element can be subject to tax. Thus when both the parties are unable to prove their stand in full deem it proper to estimate net profit rate @8% on the alleged cash deposit/business receipt of 89, 35, 000/- in order to meet the ends of justice. We accordingly do so and confirm the addition at 7, 14, 800/- as against the addition of 89, 35, 000/- made by the Assessing Officer. - Decided partly in favour of assessee.

Summary

Issues involved:
Addition towards unexplained cash deposit in bank account.

Analysis:

Issue 1: Addition towards unexplained cash deposit in bank account

The appeal was against the order of CIT(A)-II, Jabalpur regarding the addition of ?89,35,000 as unexplained cash deposit in the bank account of the assessee for the assessment year 2009-10. The assessee, an individual engaged in supervision work, received a notice under section 148 based on the cash deposit information in the savings bank account. The Assessing Officer added the amount to the income of the assessee as unexplained cash deposit, which was confirmed by the CIT(A). The assessee contended that the cash withdrawals from the bank account of a contractor were utilized for business purposes at the instruction of the contractor, and there was no element of income in the alleged cash deposits. The Revenue, however, argued in support of the CIT(A)'s order.

Issue 1 Analysis:
The Tribunal found that the assessee was associated with the contractor, and cash withdrawals in the name of the assessee were made from the contractor's bank account. The majority of these withdrawals were deposited in the assessee's account and then withdrawn at regular intervals. Both the assessee and the Revenue failed to provide clear evidence regarding the nature of the alleged cash deposits. The Tribunal noted that the source of the cash deposit was the withdrawals from the contractor's account, which consisted of business receipts for road construction. Considering the lack of conclusive evidence from both parties, the Tribunal estimated the net profit rate at 8% on the alleged cash deposit/business receipt of ?89,35,000, confirming the addition at ?7,14,800 instead of the original amount of ?89,35,000. The appeal of the assessee was partly allowed based on this analysis.

This detailed analysis of the judgment highlights the key arguments presented by both parties, the Tribunal's reasoning, and the final decision made in the case, providing a comprehensive understanding of the legal issues involved.