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2021 (4) TMI 451 - AT - Income TaxUndisclosed business turnover - Addition as income u/s.44AD - estimating 15% of the excess cash deposits - As per assessee cash deposits were made out of earlier cash withdrawals from the bank account and hence, the same cannot be regarded as undisclosed business turnover - HELD THAT - Assessee deposited ₹ 111.06 lakhs into bank account. Assessee gave a list of persons from whom cash has been received to the tune of ₹ 74,29,800/-. The assessee has claimed before the lower authority that earlier cash deposit was available to assessee to redeposit into account. Therefore, it is the duty of the assessee to establish that earlier cash was not spent by the assessee and is kept with him to redeposit it into bank account. In the absence of such evidence to show that the assessee kept the earlier cash withdrawals with him as idle, it is not possible to give any benefit of earlier withdrawals as available to assessee to redeposit into bank account. Accordingly, this ground of appeal is dismissed. Addition beyond the matter for which he has selected for limited scrutiny - Estimating the income at 15% of cheque deposit to bank account - contention of the AR is that the assessee received cheque from the prospective customers and the same was deposited into bank account and it cannot be treated as income of the assessee - HELD THAT - Whenever assessee deposits money into bank, it is the duty of the assessee to furnish the name, address and PAN to show that it is towards the advance received from the customers. In this case, the assessee failed to establish the identity of the parties from whom it has been received. Being so, the AO having no alternative, has estimated the income at 15% as offered by the assessee in its return of income. We do not find any infirmity in this action of the lower authority. The assessee made one more plea by way of additional ground that the AO cannot extend the limited scrutiny towards the estimation of income on cheque deposited in bank account In the present case, the tax liability on the impugned issue is less than ₹ 10 lakhs. Being so, the AO is within jurisdiction to take up the issue relating to cheque deposit into bank account. Accordingly, in the result this ground as well as additional ground is dismissed. Appeal of the assessee is dismissed.
Issues Involved:
1. Justification of addition of ?5,51,512 as income under Section 44AD of the Income Tax Act. 2. Justification of addition of ?9,01,350 as income under Section 44AD of the Income Tax Act. 3. Consideration of cash deposits from earlier withdrawals as undisclosed business turnover. 4. Consideration of cheque deposits and their treatment as income. 5. Scope of limited scrutiny and whether the Assessing Officer (AO) exceeded it. Detailed Analysis: 1. Justification of Addition of ?5,51,512 as Income Under Section 44AD: The assessee contested the addition of ?5,51,512 by the CIT(A), which was based on estimating 15% of the excess cash deposits amounting to ?36,76,750 as undisclosed business turnover. The assessee argued that these cash deposits were from earlier withdrawals. However, the AO found that the assessee could not substantiate this claim with evidence. The CIT(A) upheld the AO's addition, noting that the source of cash deposits remained unexplained. The tribunal agreed with the lower authorities, emphasizing that the assessee failed to prove that the earlier withdrawals were kept idle and available for redeposit. Thus, the ground of appeal was dismissed. 2. Justification of Addition of ?9,01,350 as Income Under Section 44AD: The assessee also challenged the addition of ?9,01,350, calculated at 15% of the alleged excess cheque deposits amounting to ?60,09,000. The assessee claimed that many cheque deposits were refunds to customers due to transaction cancellations. The CIT(A) found that the assessee did not provide adequate details or evidence to support this claim. The tribunal upheld the CIT(A)'s decision, noting that the assessee failed to establish the identity of the parties from whom the cheques were received. The AO's estimation of income at 15% was deemed reasonable, and this ground of appeal was also dismissed. 3. Consideration of Cash Deposits from Earlier Withdrawals: The assessee argued that the cash deposits were from earlier withdrawals, which should not be considered as undisclosed business turnover. The AO and CIT(A) found that the assessee could not provide sufficient evidence to prove that the earlier withdrawals were not spent and were available for redeposit. The tribunal concurred with this finding, dismissing the appeal on this ground. 4. Consideration of Cheque Deposits and Their Treatment as Income: The assessee contended that the cheque deposits should not be treated as income, as they were refunds to customers. The AO treated the unexplained cheque deposits as income, estimating 15% of the amount. The CIT(A) upheld this, noting the lack of evidence to support the assessee's claim. The tribunal agreed, emphasizing the necessity for the assessee to provide details of the parties involved. The tribunal found no infirmity in the lower authorities' actions and dismissed this ground of appeal. 5. Scope of Limited Scrutiny: The assessee argued that the AO exceeded the scope of limited scrutiny, which was initially to verify cash deposits. The tribunal examined CBDT Circular No.20/2015, which allows the AO to expand scrutiny if potential income escapement exceeding ?10 lakhs is identified. In this case, the tribunal found that the AO acted within jurisdiction as the potential tax liability was less than ?10 lakhs. Therefore, the tribunal dismissed the additional ground of appeal. Conclusion: The tribunal dismissed the appeal in its entirety, upholding the additions made by the AO and confirmed by the CIT(A). The tribunal found that the assessee failed to provide sufficient evidence to substantiate claims regarding cash deposits, cheque deposits, and the scope of limited scrutiny.
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