2021 (1) TMI 122 - AT - Income Tax

Non production of books of accounts - disallowance of expenses - estimate the income from business of the appellant by rejecting the financial statements - HELD THAT - Assessee was asked to produce the books of accounts and proof for the expenses claimed but in spite of this, the assessee has neither produced the books of accounts nor produced the proof for expenses claimed. A categorical finding is given by learned CIT(A) that as per the Assessment Order, the assessee failed to produce the books of accounts despite several opportunities provided by the AO. Before the Tribunal also, this is not the claim of the assessee that even if the matter is restored back to the file of AO, the assessee can produce the books of accounts and the proof for the expenses claimed. Under these facts, we find no reason to interfere in the order of learned CIT(A) and AO on this issue and accordingly, ground Nos.2.1 to 2.4 raised before the Tribunal are rejected. Unexplained cash deposit in the Bank account of the assessee - HELD THAT - As per the summary of cash deposit in these bank accounts, we are satisfied that the total cash deposits in the bank account of the assessee is explained and under these facts, on factual aspect also, we find that this addition is not justified.

Issues Involved:
1. Estimation of business income by the Assessing Officer.
2. Addition of unexplained cash deposits in the bank.
3. Violation of principles of natural justice.
4. Condonation of delay in filing the appeal.

Detailed Analysis:

1. Estimation of Business Income:
The assessee contested the Assessing Officer's (AO) decision to estimate the business income at ?60,00,000/- against the declared income of ?31,14,651/-. The AO rejected the financial statements despite them being audited, citing the assessee's failure to produce books of accounts and proof for expenses claimed. The Tribunal upheld the AO's decision, noting that the assessee did not produce the required documents despite several opportunities. The Tribunal found no reason to interfere with the AO's and CIT(A)'s orders on this issue, thereby rejecting ground Nos. 2.1 to 2.4 raised by the assessee.

2. Addition of Unexplained Cash Deposits:
The AO added ?1,07,27,000/- to the assessee's income, alleging unexplained cash deposits in the bank. The assessee argued that the same books of accounts, which were rejected for estimating business income, could not be relied upon for making this addition. The Tribunal referred to the Karnataka High Court's judgment in CIT vs. Bahubali Neminath Muttin, which held that rejected books of accounts cannot be used for making other additions. Consequently, the Tribunal deleted the addition of ?1,07,27,000/-.

On the factual aspect, the Tribunal examined the bank statements and found that the cash deposits were made in disclosed bank accounts and were explained by cash sales and withdrawals. The total cash deposits of ?1,07,27,000/- were satisfactorily explained, and the addition was deemed unjustified.

3. Violation of Principles of Natural Justice:
The assessee raised additional grounds, arguing that the AO did not provide sufficient opportunity for being heard, violating principles of natural justice. The Tribunal did not separately address this issue in detail, as the primary contentions regarding income estimation and unexplained cash deposits were already discussed and resolved.

4. Condonation of Delay:
The appeal was filed with a delay of 73 days, which the assessee attributed to illness. The Tribunal condoned the delay, considering the medical certificate provided and the circumstances described. The appeal was admitted for hearing.

Conclusion:
The Tribunal partly allowed the assessee's appeal. While the estimation of business income by the AO was upheld, the addition of ?1,07,27,000/- as unexplained cash deposits was deleted based on legal precedent and factual examination. The delay in filing the appeal was condoned, allowing the appeal to be heard on its merits.

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