2020 (1) TMI 474 - AT - Income Tax

Un-explained cash credit u/s. 68 - assessee had contended that the assessee has no other source of income other than Kirana business and therefore the unexplained deposits may also be treated as receipts from Kirana business and only the profit element from such turnover be brought to tax - HELD THAT - Assessee has not established that the deposits are out of business transactions, but the peak cash credit added by the AO and confirmed by the CIT(A) also cannot be upheld because the assessee had declared the gross turnover of ₹ 30,00,000/- which is also part of the cash deposits. Therefore, the peak credit worked out by the AO could be a receipt from business transactions also. In view of these peculiar facts and circumstances of the case, direct the AO to treat all the unexplained cash credits also as the business turnover of the assessee and estimate the income thereon at the same rate at which the disclosed income is brought to tax. - Decided in favour of assessee.

Summary

Issues:
1. Treatment of unexplained cash credits in the savings bank account as income under section 68 of the Income Tax Act.
2. Whether the unexplained deposits should be treated as receipts from the Kirana business and only the profit element be taxed.

Analysis:
1. The appeal was filed against the order of the Commissioner of Income Tax (Appeals) regarding the treatment of unexplained cash credits in the savings bank account. The Assessing Officer (AO) observed significant cash deposits in the assessee's bank account and requested details of the sources of funds. The assessee claimed the deposits were from loans and business transactions. However, the AO treated a peak credit amount as unexplained cash credit under section 68 of the Act. The CIT(A) confirmed this addition.

2. The assessee contended that the unexplained deposits should be considered as receipts from the Kirana business, and only the profit element should be taxed. Despite this argument, the CIT(A) upheld the addition made by the AO. The appeal before the Tribunal raised grounds challenging the CIT(A)'s decision and requested the addition to be reconsidered based on the business turnover.

3. The Tribunal analyzed previous court decisions related to similar cases where cash credits were treated as income from other sources. The Tribunal noted that the assessee failed to provide substantial evidence to prove that the deposits were solely from business transactions. However, considering the peculiar facts of the case, the Tribunal directed the AO to treat all unexplained cash credits as part of the business turnover and tax the income at the same rate as the disclosed turnover.

4. Ultimately, the Tribunal allowed the appeal of the assessee, directing the AO to estimate the income on unexplained cash credits as part of the business turnover. The decision was pronounced in the open court on 4th December 2019.