2021 (7) TMI 800 - AT - Income Tax

Unexplained source of the cash deposits - According to the assessee, he stated receipt in cash on sale of shop, furniture and closing stock of textile, whereas according to the AO, the assessee stated receipt on sale of the shop only and in the registered deed, sale of the shop is recorded only at ₹ 6 lakhs and therefore balance ₹ 24 lakh received falls under the head income from other sources being premium received on sale of shop - HELD THAT - CIT(A) rejected the contention of the assessee mainly due to lack of evidence in support of the claim of the assessee. Before us, the learned counsel submitted that the assessee is willing to submit necessary documentary evidence in support of its claim of sale of closing stock of the textile and realisation of the debtors. We set aside the order of the Ld. CIT(A) and restore the matter back to the file of the Assessing officer for deciding afresh with the direction to the assessee to file all the necessary documentary evidences in support of his claim. Appeal of the assessee is allowed for statistical purposes.

Issues Involved:

1. Eligibility for presumptive taxation under section 44AD.
2. Acceptance of cash receipts against turnover.
3. Addition of cash deposits as undisclosed income.
4. Sale of shop and its valuation.
5. Treatment of entire cash deposits as unexplained.
6. Presumptive taxation scheme and cash receipts.
7. Misinterpretation of sale amount and capital gain exemption.
8. Procedural grounds for adding, altering, or withdrawing grounds of appeal.

Issue-wise Detailed Analysis:

1. Eligibility for Presumptive Taxation under Section 44AD:
The appellant argued that the Ld. CIT(A) accepted their eligibility for presumptive taxation under section 44AD, as evident from the return filing. However, the Ld. CIT(A) did not accept the cash receipts of ?22,42,700 against the turnover without providing reasons. The Tribunal noted that the Ld. CIT(A) recognized the turnover declared under section 44AD but questioned the cash deposits due to lack of supporting evidence.

2. Acceptance of Cash Receipts Against Turnover:
The appellant contended that the Ld. CIT(A) erred in not accepting the cash receipts of ?22,42,700 against the turnover. The Tribunal observed that the Ld. CIT(A) found the explanation regarding cash receipts unsatisfactory due to insufficient evidence.

3. Addition of Cash Deposits as Undisclosed Income:
The appellant challenged the addition of ?32,50,000 as undisclosed income, arguing that the amount deposited in the bank was from the opening cash balance, sale of the shop, sale of closing stock, and realization from debtors. The Tribunal noted that the Assessing Officer treated the amount of ?24 lakh (?30 lakh - ?6 lakh) as income from other sources due to the discrepancy between the registered sale deed and the appellant's claim.

4. Sale of Shop and Its Valuation:
The appellant argued that the Ld. CIT(A) incorrectly presumed the shop was sold for ?30 lakh, while it was actually sold for ?6 lakh plus the sale of stock and debtors. The Tribunal observed that the Ld. CIT(A) and the Assessing Officer found the sale deed recorded only ?6 lakh, treating the balance as income from other sources.

5. Treatment of Entire Cash Deposits as Unexplained:
The appellant contended that the Ld. CIT(A) erred in treating the entire cash deposits as unexplained, disregarding the cash withdrawals and opening cash balance. The Tribunal noted that the Ld. CIT(A) found the explanation for the cash deposits unsatisfactory due to lack of verifiable particulars and evidence.

6. Presumptive Taxation Scheme and Cash Receipts:
The appellant argued that under the presumptive taxation scheme, no addition should be made for cash deposits when income is offered under section 44AD. The Tribunal observed that the Ld. CIT(A) rejected the explanation due to lack of evidence supporting the claim of cash receipts from sales and debtors.

7. Misinterpretation of Sale Amount and Capital Gain Exemption:
The appellant claimed that the Ld. CIT(A) misinterpreted the sale amount of the shop and failed to consider the exemption for long-term capital gain under section 54F. The Tribunal noted that the Ld. CIT(A) advised the Assessing Officer to compute capital gain after allowing deductions under section 54F/54, but found the appellant's explanation for the sale amount inconsistent with the registered deed.

8. Procedural Grounds for Adding, Altering, or Withdrawing Grounds of Appeal:
The appellant sought the liberty to add, alter, amend, or withdraw grounds of appeal. The Tribunal did not specifically address this procedural ground but focused on the substantive issues raised.

Conclusion:
The Tribunal set aside the order of the Ld. CIT(A) and remanded the matter back to the Assessing Officer for a fresh decision. The appellant was directed to submit necessary documentary evidence to support their claims. The appeal was allowed for statistical purposes, ensuring the appellant would be given an adequate opportunity to present their case.

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