2022 (4) TMI 236 - AT - Income Tax

Unexplained deposits - Amount found deposited in the joint account of assessee as well as his wife in the savings bank account of Axis Bank - according to the assessee, this amount was trade receipt from sale of seasonal vegetables of the business of his wife and not that of his - HELD THAT - Even if it is presumed that the assessee or his wife has not disclosed this bank account in the Axis Bank to the department, still the total deposit in the joint account cannot be treated as the undisclosed income of the assessee because as find that there was regular withdrawal after the deposits. Assessee is executing contract works as well as he is into the business of selling seasonal vegetable products; and in such a factual scenario, when it is evident that there was several deposits and simultaneous withdrawals, the entire deposit of amount cannot be brought to tax as income of the assessee. In this case, in the Axis Bank account in question, find that there is regular inflow of money and regular outgo of money which gives credence to the explanation of the assessee or his wife that they are into trading activity (seasonal agriculture products) Even if it is presumed that the deposits made in the Axis Bank which has not been disclosed to the department was taken as correct still the entire amount cannot be taxed as done by the lower authorities. Therefore, taking into consideration of the fact that the assessee is into the contractual business which has not been disputed by the AO/Ld. CIT(A), for the ends of justice the presumptive tax @ 8% of the total amount is confirmed and the balance amount is directed to be deleted. Appeal of the assessee is partly allowed.

Summary

Issues:
1. Addition to income based on cash deposits in joint bank account.
2. Dispute over the source of cash deposits and ownership of funds.
3. Assessment of undisclosed income and tax liability.

Analysis:
1. The appeal was filed against the order of the Ld. CIT(A) enhancing the addition to the income tax return. The initial addition by the AO was &8377; 13,97,640, while the Ld. CIT(A) increased it to &8377; 27,68,700.

2. The case revolved around the cash deposits of &8377; 27,68,700 in a joint bank account of the assessee and his wife. The assessee claimed that the funds belonged to his wife's business, supported by P&L Account and Balance Sheet. However, the AO and Ld. CIT(A) rejected this defense due to the absence of a trade license for the wife's business, leading to the initial addition.

3. During the appeal, it was noted that the wife did not have the financial capacity to deposit the said amount. The Tribunal observed regular deposits and withdrawals in the bank account, indicating trading activities. Considering the factual background and regular banking transactions, the entire deposit could not be treated as undisclosed income. The Tribunal confirmed a presumptive tax of 8% on the total amount of &8377; 27,68,700, resulting in a confirmed tax liability of &8377; 2,21,496, with the balance amount directed to be deleted.

4. The Tribunal found that the assessee was engaged in contractual business and seasonal vegetable sales, which supported the explanation of trading activities. Given the continuous inflow and outflow of funds in the bank account, the Tribunal concluded that the entire deposit could not be taxed as income. Therefore, for the sake of justice, a portion of the amount was confirmed as taxable income, while the remaining balance was directed to be deleted.

5. Ultimately, the appeal of the assessee was partly allowed, with the Tribunal pronouncing the order in the open court.