2019 (4) TMI 1028 - AT - Income Tax

Unexplained cash deposits u/s 68 - Addition on account of deposit in bank account maintained with Oriental Bank of Commerce - HELD THAT - Computation of income for earlier year as well as assessment year under appeal, details of sales, purchase and debtors along with cash flow statement, which would show that assessee has been filing the return of income under section 44AD as such, assessee was not required to maintain books of account. The assessee has disclosed interest income in the return of income from both the Bank Accounts, therefore, it cannot be said that Oriental Bank of Commerce have not been disclosed to the Revenue Department. The material on record clearly suggest that assessee was doing business activities and different sale proceeds amounts received from the debtors, which have been deposited in the Bank Accounts. One Bank account accepted by the Ld. CIT(A) because it was disclosed in the return of income. Interest from both the Bank Accounts have been disclosed in the computation of income filed with the return of income, as such, the CIT(A) on the same reasoning should not have made the addition against the assessee. The assessee has explained the source of cash deposited in Oriental Bank of Commerce. A.O. has taken only the cash deposits in the Bank Account ignoring the amounts withdrawn from the same Bank account, which should have also been considered by the authorities below. Thus, the assessee explained the source of the Bank deposits through the evidences admitted on record. No justification to sustain the addition. We, accordingly, set aside the Orders of the authorities below and delete the entire addition.- Decided in favour of assessee.

Summary

Issues:
Challenging addition of ?15,37,400 on account of deposit in bank account maintained with Oriental Bank of Commerce.

Analysis:

Issue 1: Addition of Unexplained Cash Deposits
The Assessing Officer (A.O.) made an addition of ?26,98,900 treating the cash deposits as unexplained under section 68 of the Income Tax Act, 1961. The assessee claimed that the cash deposits were from the sale turnover and payments received from debtors but failed to provide evidence. The Ld. CIT(A) deleted the addition of ?11,61,500 but confirmed the addition of ?15,37,400, noting the failure of the assessee to explain this amount's source related to business activities.

Issue 2: Assessee's Submissions
The assessee declared income under different heads and explained that the cash deposits were from sale turnover and payments from debtors. Detailed documents were submitted, including bank statements, income computation, and details of turnover, sales, purchases, debtors, and creditors. The assessee argued that as income was declared under section 44AD, books of account were not mandatory. The Ld. CIT(A) accepted one bank account as disclosed but upheld the addition of ?15,37,400 due to lack of proof linking it to business activities.

Issue 3: Assessee's Arguments
The counsel reiterated that complete details were filed, showing business activities and income under section 44AD. Withdrawals from the bank accounts were highlighted, indicating business-related transactions. The counsel argued that all relevant documents were submitted with the return of income, and interest income from both bank accounts was disclosed to the Revenue Department, challenging the justification for the addition.

Issue 4: Tribunal's Decision
After reviewing submissions and evidence, the Tribunal found that the assessee's business activities were supported by documentation, and the source of cash deposits was explained. It was noted that interest from both bank accounts was disclosed, and withdrawals were not considered by the authorities. The Tribunal concluded that the addition was unjustified, setting aside the lower authorities' orders and deleting the entire addition.

Conclusion
The Tribunal allowed the appeal of the assessee, emphasizing the disclosure of interest income and business activities supported by evidence. The addition was deemed unwarranted, and the entire amount was deleted.