2021 (11) TMI 53 - AT - Income Tax

CIT(A) enhancing the total income by exercising his powers u/s 251 - addition u/s 68 - income from plying of mini truck - Gp estimation - HELD THAT - We note that the assessee s case is that he is into the business of potato/onion/grocery and has offered presumptive tax u/s 44AE of the Act since he is not maintaining any books of accounts. According to the assessee, he has gross receipt from this business to the tune of ₹ 18,17,625/- and therefore he has offered presumptive tax of ₹ 1,45,410/- which is 12.5% of the gross receipt. This income of the assessee from potato/onion/grocery need to be accepted since it has been brought to our notice that the assessee has been consistently assessed in the earlier assessment years also the income from this business and therefore the same to be accepted from this business Income from plying of mini truck - As action of the authorities below not to accept the genuinety of gross receipt from freight from a mini truck is a plausible view. CIT(A) for want of any proof in respect of the credit entry in the bank account has made addition u/s 68 of the Act without giving any consideration to the debit/withdrawal of the money. So the action of the Ld. CIT(A) on this score cannot be per-se countenanced. And it is equally interesting to note that both AO/Ld. CIT(A) has accepted the presumptive tax from mini truck offered by assessee u/s 44AE of the Act which means the authorities below has accepted that the assessee is in to the business of plying vehicle and eligible for adopting presumptive tax u/s 44AE of the Act which action we also concur/confirm. Therefore we order accordingly. Cash deposits in the assessee s bank account as depicted in the chart given by the AO - It goes without saying that when there is cash deposits in his account, he is duty bound to explain the nature and source of the deposits in it during the proceedings before the AO. Be that as it may be, reasonable estimation of the income of the assessee need to be made on the cash deposit/withdrawal made in the assessee s bank account. Therefore, we set aside the order of the Ld. CIT(A) and remand to the AO for estimation of income in respect of the sums deposited. For that the AO to consider the withdrawn amount also and after allocation of reasonable gross receipt from the mini-truck and taking in to consideration from grocery, reasonable estimation of income to be computed in accordance to law - we set aside the impugned order of the CIT(A) and remand the matter back for the limited purpose as afore-stated. The assessee is directed to file written submission/documents to substantiate his claim and the AO to give an opportunity of hearing if the assessee avails for it. Appeal of the assessee is partly allowed for statistical purposes

Summary

Issues:
- Appeal against the order of Ld. CIT(A)-Guwahati for assessment year 2015-16 (quantum appeal)
- Appeal against penalty u/s 271(1)(c) of the Income Tax Act, 1961

Detailed Analysis:

Quantum Appeal (ITA No. 445/Gau/2019):
1. Enhancement of Total Income: The AO enhanced the total income by adding ?85,89,312 u/s 68 of the Act, as the assessee failed to explain the nature and source of cash deposits in the bank account. The Ld. CIT(A) upheld this addition, stating the assessee could not substantiate income from the mini truck business or trading of potato/onion. The Ld. CIT(A) treated the entire credits in the bank account as cash credit u/s 68, leading to the addition. The AO also initiated penalty proceedings u/s 271(1)(c).

2. Contradictions in AO's Observations: Discrepancies were noted in the AO's observations regarding the income from the mini truck business and the cash deposits. The AO questioned the credibility of the income declared from the mini truck, leading to the conclusion that the assessee had suppressed income from the potato/onion business. The Ld. CIT(A) upheld the addition, emphasizing the need for proper explanation of cash deposits.

3. Acceptance of Income: The Tribunal accepted the income declared by the assessee from the potato/onion/grocery business. It was noted that the assessee had consistently reported this income in previous assessments. However, doubts were raised regarding the income claimed from the mini truck business, leading to the addition by the authorities.

4. Remand for Estimation: The Tribunal set aside the Ld. CIT(A)'s order and remanded the matter to the AO for estimation of income based on the cash deposits and withdrawals. The AO was directed to consider all relevant factors, including the gross receipts from the mini-truck and income from grocery business, for a reasonable estimation of income.

Penalty Appeal (ITA NO. 446/Gau/2019):
1. Direction for Reassessment: In light of the directions given in the quantum appeal, the Tribunal set aside the penalty order and directed the AO to proceed afresh in accordance with the law after hearing the assessee.

2. Final Decision: The quantum appeal was partly allowed for statistical purposes, and the penalty appeal was allowed for statistical purposes. The Tribunal pronounced the order on 28th October, 2021, providing relief to the assessee in the quantum appeal and directing a reassessment for the penalty appeal.