2022 (3) TMI 967 - AT - Income Tax

Unexplained cash deposits u/s 68 - bank account in which the cash was deposited was a joint account of the assessee with his father - HELD THAT - It is an undisputed fact that the That both were in the business of contractors and had returned income on presumptive basis u/s. 44AD @ 8% net profit on business receipts - which has been accepted in scrutiny assessment by the Revenue. DR was unable to controvert the above facts before us. We fail to understand how the entire cash deposited has been/could be attributable to that belonging to the assessee alone particularly when no reason has been given by the Revenue for doing so. Noting that the admitted business receipts of the assessee and his father were in the ratio of 1 2.5, it would be reasonable to attribute the cash deposits in the said bank account in the same ratio, applying which the cash deposits attributable to the assessee at the most comes to ₹ 9,16,500/- (32,08,00 x 1/3.5). The addition in any case of unexplained cash deposits, we hold, could not have exceeded ₹ 9,16,500/-. Since the entire exercise is based on surmises and approximations, the resultant unexplained cash deposit of ₹ 3 lacs odd out of total cash deposits of ₹ 32,08,000/-, being barely 10% of the same is too immaterial to be treated as cash deposit remaining unexplained. We therefore hold that there was no case at all for making any addition on account of unexplained cash deposits. The addition therefore made ₹ 12,83,200/- is accordingly directed to be deleted. - Decided in favour of assessee.

Summary

Issues involved:
Addition made on account of unexplained cash deposits in the bank account for Assessment Year 2009-10.

Analysis:
The appeal was filed against the order passed by the Commissioner of Income Tax (Appeals) regarding unexplained cash deposits totaling ?32,08,000, which were partly accepted by the CIT(A) at ?12,83,200. The main contention was the addition of ?12,83,200 on account of unexplained cash deposits. The appellant challenged the decision, citing errors in law, facts, and principles of natural justice.

The CIT(A) partly accepted the explanation of the cash deposits sourced from cash withdrawals. The CIT(A) considered the appellant's business income under section 44AD and attributed a portion of cash withdrawals to business and personal needs, providing relief to the extent of ?18,94,800. However, the balance addition of ?12,83,200 was confirmed by the CIT(A.

The appellant's counsel argued that the cash deposits were in a joint account with the appellant's father, both being contractors with accepted income under section 44AD. The counsel contended that the cash withdrawals far exceeded deposits, making the deposits attributable to withdrawals. The counsel also highlighted the payments made through account payee cheques for business purposes.

The Tribunal noted that the cash deposits in the joint account could not solely be attributed to the appellant, especially considering the business receipts of the appellant and his father. The Tribunal calculated the maximum cash deposits attributable to the appellant at ?9,16,500. Additionally, the Tribunal emphasized the need to consider the cheques issued from the account for personal purposes.

Based on the analysis, the Tribunal concluded that the addition of ?12,83,200 for unexplained cash deposits was unwarranted. The Tribunal found the unexplained cash deposit of around ?3,00,000 out of total deposits of ?32,08,000 too insignificant to justify the addition. Consequently, the Tribunal directed the deletion of the addition of ?12,83,200, allowing the appeal of the Assessee.

In summary, the Tribunal held that the addition on account of unexplained cash deposits was not justified, considering the joint account, business activities, and cash flow analysis. The Tribunal emphasized the need for a reasonable attribution of cash deposits and cheques issued, leading to the deletion of the addition.