2020 (11) TMI 472 - AT - Income Tax

Business income v/s undisclosed income - AO held that the assessee could not substantiate her business activities nor could explain the cash deposits in the bank account - HELD THAT - From a bare perusal of the bank statement which was basis for the addition, it is seen that assessee has received cash from various vendors/ purchasers outside the Delhi and the narration given in the account mentions by cash- Jhansi- Shipri Bazar , by cash cashupl-Solapur , by cash cashupl- Jodhpur , by cash Ajmer , and likewise wherein cash amount has been deposited in her bank account on various dates. One very glaring feature from the perusal of the bank account is that the assessee has been paying VAT and such entries are appearing all throughout the year on various dates. Payment of VAT does indicate purchase and sale of some goods, items or services. All these factors thus, go to show that some kind of business activity was carried out by the assessee. If the assessee had shown income u/s.44AD which is presumptive basis for taxation and looking to the nature of bank account entries and regular cash deposits and withdrawals this shows that assessee was doing some kind of business activities and preponderance of probabilities for such activities is definitely goes in favour of the assessee. Assessing Officer has tacitly accepted the business income by accepting the return of income from the same deposits - we direct the Assessing Officer to accept the return of income as business income.

Summary

Issues:
Validity of initiation of proceedings u/s.147/148 and addition of income against return of income for Assessment Year 2011-12.

Analysis:
The appeal was filed against the order passed by Ld. Commissioner of Income Tax (Appeals)-XIV, New Delhi for the quantum of assessment. The assessee challenged the validity of proceedings u/s.147/148 and addition of ?13,61,300 against the declared income of ?1,79,200. The assessee, an individual providing coaching and engaged in the business of purchase and sale, had cash deposits exceeding ?10 lac during the financial year 2009-10. A notice u/s.148 was issued as the return was not filed for Assessment Year 2010-11. The Assessing Officer treated the entire cash deposits as income from undisclosed sources, assessing it at ?15,40,500. The Ld. CIT (A) confirmed the addition due to lack of explanation for the source of cash deposits.

The assessee contended that the business income was accepted by the Assessing Officer under section 44AD, supported by regular cash transactions from various cities and GST payments. The onus was on the assessee to prove the source of deposits and business activities with evidence. The Tribunal noted that the assessee had not filed a return for Assessment Year 2010-11, except in response to the notice u/s.148. The bank statements showed cash deposits from various locations, indicating business transactions. The Tribunal found that the Assessing Officer tacitly accepted the business income by acknowledging the return of income from the same deposits.

The Tribunal directed the Assessing Officer to accept the declared income of ?1,79,200 as business income, partially allowing the appeal. The decision was based on the nature of bank account entries, regular cash transactions, and VAT payments, indicating business activities. The Tribunal emphasized the preponderance of probabilities favoring the assessee's business operations. The onus was on the assessee to substantiate business activities and the source of cash deposits, which was deemed satisfied based on the evidence presented.