2022 (6) TMI 239 - AT - Income Tax

Enhancement of assessment u/s 251 - Reopening of assessment u/s 147 - addition u/s 68 on unexplained cash deposited in bank account - unexplained contract receipt - HELD THAT - CIT(A) issued notice under section 251(2) of the Act to the assessee show causing as to why assessment for Asst.Year 2009-10 be not enhanced by this amount, as identities of the persons from whom such receipts were claimed to have been made and evidence thereof, could not be produced by the assessee. It was explained by the assessee that since the assessee filed the return of income under the scheme of section 44AD, he was exempted from maintaining books of accounts. Except this submission, there was nothing on record to prove the case of the assessee that the amount of Rs.5,75,250/- claimed to have been received as contract receipts. In the absence of the material evidence to prove his case, the ld.CIT(A) increased an amount of Rs.5,75,250/- to the income of the assessee and enhanced the assessment according by invoking provisions of section 251(1) of the Act. It was also noticed by the ld.CIT(A) that the assessee has not filed any return of income voluntarily, and only after issuance of notice under section 148 the assessee came forward and filed the return for the Asst.Year 2009-10. Had there been no proceedings under section 148 of the Act, the assessee would not have filed any return of income. Even before us also, there is no fresh material evidence to support claim of the assessee except submissions and materials as were placed before the lower authorities. In this view of the matter, we do not find any infirmity in the order of the ld.CIT(A), which we uphold, and the grounds of appeal of the assessee are rejected.

Summary

Issues Involved:
1. Confirmation of addition of Rs. 6,50,000 as unexplained cash deposits.
2. Enhancement of assessment by Rs. 5,75,250 under section 44AD.
3. Initiation of proceedings under section 271(1)(c).

Detailed Analysis:

1. Confirmation of Addition of Rs. 6,50,000 as Unexplained Cash Deposits:
The assessee, an individual deriving income from small contract work and agriculture, did not file a regular return for the Assessment Year (AY) 2009-10 but submitted a return on 27.7.2016 in response to notices under sections 142(1) and 143(2) of the Income Tax Act, 1961 ("the Act"). The Assessing Officer (AO) noticed significant cash deposits of Rs. 10,00,000 in the assessee's bank accounts and an opening capital balance of Rs. 34,56,281. The AO issued a show-cause notice, doubting the sources of these amounts. The assessee explained that the capital balance was accumulated from previous years, and the cash deposits were from earlier withdrawals. However, the AO rejected this explanation, adding Rs. 34,56,281 under section 69 and Rs. 10,00,000 under section 68 of the Act as unexplained income.

Upon appeal, the Commissioner of Income-tax (Appeals) [CIT(A)] accepted the assessee's explanation for the opening capital balance of Rs. 34,56,281, noting it represented prior investments. However, for the Rs. 10,00,000 cash deposits, the CIT(A) found that only Rs. 3,50,000 was satisfactorily explained, reducing the unexplained amount to Rs. 6,50,000, which was confirmed as an addition under section 68.

2. Enhancement of Assessment by Rs. 5,75,250 Under Section 44AD:
The CIT(A) observed that the assessee had shown gross contract receipts of Rs. 15,75,250 and offered Rs. 1,26,020 as income under section 44AD of the Act. Summons issued to parties paying these amounts resulted in confirmations for only Rs. 3,50,000. The remaining Rs. 6,50,000 was treated as unexplained. Additionally, the assessee could not provide evidence for Rs. 5,75,250 from petty contracts. Consequently, the CIT(A) treated this as unexplained cash credit and enhanced the assessment by Rs. 5,75,250.

3. Initiation of Proceedings Under Section 271(1)(c):
The AO had initiated proceedings under section 271(1)(c) for concealment of income. The CIT(A) upheld the initiation of these proceedings, given the discrepancies and unexplained amounts in the assessee's financial declarations.

Conclusion:
The Tribunal upheld the CIT(A)'s order, confirming the addition of Rs. 6,50,000 as unexplained cash deposits and the enhancement of assessment by Rs. 5,75,250. The Tribunal noted that the assessee failed to provide fresh evidence or substantiate claims beyond what was presented to the lower authorities. Consequently, the grounds of appeal by the assessee were rejected, and the appeal was dismissed. The order was pronounced on 3rd June 2022 at Ahmedabad.