2021 (9) TMI 1263 - AT - Income Tax

Addition being cash deposit in the saving bank account - cash deposits treated as undisclosed income - Assessee argued that deposit made by the assessee on 29.11.2010 has been deposited out of the cash withdrawn earlier - HELD THAT - The cash withdrawals made earlier by the assessee has not been controverted by Revenue but however the contention of the assessee that the cash deposits are out of such cash withdrawals was not accepted by the AO as there was a huge difference between the dates of cash withdrawal and cash deposits. Before us Revenue has not placed any material to demonstrate that the cash withdrawal made by the assessee was not available with the assessee as it has been spent by the assessee or has been invested and therefore was not available for deposits. In such a situation without their being evidence to the contrary we are of the view that the explanation of the assessee of the cash deposits being out of the withdrawals made earlier cannot be simply brushed aside. We therefore direct the deletion of cash deposits of 2 lakh. - Decided in favour of assessee. Bogus purchases - assessee argued that the impugned purchase made from Aggarwal Canvas Co. the sales have been made and the sales have been accepted by the Revenue and in such a situation no disallowance of purchases is called for - HELD THAT - As assessee could not produce the copy of the purchase invoice of Aggarwal Canvas Co. before the CIT(A) nor has it been produced before us. It is also a fact that alternatively it is the contention of the Learned AR that the gross profit of the sales made from the impugned purchases could be added to the income. Before us assessee has not placed any record to point out the gross profit earned by the assessee during the year. Considering the totality of the facts and also the fact that the appeal is of A.Y. 2011-12 we are of the view that ends of justice shall be met in the present case if the disallowance is restricted to 15, 000/-. We therefore direct the disallowance be made of 15, 000/- and direct the deletion of the balance disallowance of 1, 56, 220/-. Thus the ground of the assessee is partly allowed.

Summary

Issues:
1. Addition of cash deposit in the saving bank account as undisclosed income.
2. Disallowance of purchases under the head of purchases.

Issue 1: Addition of Cash Deposit

The appeal was against the order of the Commissioner of Income Tax (Appeals) relating to Assessment Year 2011-12. The Assessee, engaged in the business of Trading in Cloth/Fabrics, filed a return of income declaring total income. The case was selected for scrutiny, and the assessment was framed under section 143(3) of the Act. The primary issue was the addition of ?10,70,000 as cash deposit in the saving bank account. The Assessing Officer (AO) treated the entire cash deposit as undisclosed income, rejecting the explanation that the deposits were from earlier cash withdrawals. The CIT(A) upheld the AO's order. However, the ITAT Delhi, after analyzing the cash deposits, directed the deletion of ?8,70,000 as they did not pertain to the relevant assessment year. Regarding the remaining ?2,00,000 deposit, the ITAT accepted the Assessee's explanation that it was from earlier withdrawals. As the Revenue failed to prove otherwise, the ITAT directed the deletion of the entire amount added by the AO.

Issue 2: Disallowance of Purchases

The second ground of appeal was related to the disallowance of ?1,71,220 under the head of purchases. The AO disallowed the entire purchase amount as the Assessee could not produce a bill for a specific amount. The CIT(A) partially upheld the disallowance concerning the missing bill. During the ITAT proceedings, the Assessee argued that since the corresponding sales were accepted, there was no reason to treat the purchases as bogus. The ITAT noted that the Assessee failed to produce the purchase invoice before the CIT(A) or during the appeal. Considering the circumstances and lack of evidence on gross profit, the ITAT directed a disallowance of ?15,000 and deletion of the remaining ?1,56,220. The ITAT partly allowed the Assessee's appeal in this regard.

In conclusion, the ITAT Delhi partially allowed the Assessee's appeal, directing the deletion of the cash deposit amount of ?10,70,000 and reducing the disallowance of purchases to ?15,000.