2019 (10) TMI 346 - AT - Income Tax

Addition u/s 68/69A treating the cash deposits as unexplained cash credit - whether deposits in the bank account of the assessee can be recorded as trading asset or whether such deposits are to be recorded as the income from unexplained source u/s 68/69? - HELD THAT - While total deposit in cash was found to be ₹ 33,42,622/-, there is simultaneous withdrawal to the extent of ₹ 30,50,000/- during the year. The cash book filed by the assessee showing day-to-day generation of cash and deposits thereof also makes it clear that the assessee is engaged in systematic activity of retail business. The withdrawal of similar amount of cash substantiates the claim of the assessee to be engaged in retail business to a great extent. Coupled with this, the claim of the assessee also gains support from the statement recorded by the Investigation Wing u/s 132(4). The assessee has also supported its claim of being engaged in retail business by month-wise summary of retail transactions showing quantity and value. We are inclined to accept the cash deposit to be arising and attributable to retail trade. This being so and in view of the averments made on behalf of the assessee, the business income from retail trade may be estimated by invoking Section 44AF of the Act. Similar view has been echoed in CIT vs. Pradeep Shantilal Patel 2013 (11) TMI 1646 - GUJARAT HIGH COURT and CIT vs. Surinder Pal Anand 2010 (6) TMI 404 - PUNJAB AND HARYANA HIGH COURT As per the scheme of presumptive taxation provided u/s 44AF the estimated business income from aggregate cash deposits / turnover works by applying 5% thereon. The estimated income from the cash deposits in the bank is thus requires to be restricted to the aforesaid amount. AO is directed to do so

Summary

Issues:
1. Reopening of assessment proceedings without proper jurisdiction and reasons.
2. Addition of cash deposits as unexplained cash credit under sections 68/69A.

Issue 1: Reopening of Assessment Proceedings
The appellant challenged the reopening of assessment proceedings, arguing that it lacked jurisdiction and was based on the reasons/satisfaction of a third party. The appellant contended that the CIT(A) erred in confirming the AO's action of reopening without bringing independent reasons on record. The Tribunal dismissed Ground No.1 of the appeal as not pressed, indicating that the appellant did not pursue this issue further.

Issue 2: Addition of Cash Deposits as Unexplained Cash Credit
The AO made additions towards unexplained cash deposits in the bank account under sections 68/69A based on information from the investigation wing. The CIT(A) upheld the AO's decision, noting that the nature and details of the appellant's retail business were not adequately explained. The appellant argued before the Tribunal that the cash deposits were from retail business transactions, supported by documents and statements. The Tribunal observed that the appellant had systematically engaged in retail business, evidenced by day-to-day cash generation and withdrawals. Considering the evidence presented, the Tribunal accepted the cash deposits as attributable to retail trade. Invoking Section 44AF of the Act, the Tribunal estimated business income at 5% of the total turnover, restricting the income from cash deposits to ?1,67,131. The Tribunal directed the AO to adjust the income accordingly, partially allowing the appeal for AY 2010-11.

Issue 3: Similar Matter for AY 2009-10
In a separate appeal for AY 2009-10, involving similar cash deposits and withdrawals, the Tribunal applied the same reasoning as in AY 2010-11. The Tribunal set aside the CIT(A)'s order and directed the AO to estimate income at 5% of the cash deposits under Section 44AF of the Act, partially allowing the appeal for AY 2009-10.

In conclusion, the Tribunal partially allowed both appeals, emphasizing the systematic nature of the appellant's retail business to justify the cash deposits and withdrawals, thereby restricting the income from cash deposits under presumptive taxation provisions.