2022 (7) TMI 1137 - AT - Income Tax

Addition u/s 68 - cash deposited by the assessee in his bank account which is fully explained - HELD THAT - As perused the material available on record and decisions relied upon by the assessee. Respectfully following the decision of the coordinate bench and in the absence of any contra judgment produced by the DR following the cited co-ordinate bench decision we hold that benefit of the ratio decided in those judgement be given to the assessee but as the assessee unable to substantiate the whole deposit and taking the turnover is not correct. Therefore, the assessee should pay the tax considering the whole amount of cash deposited as turnover and on that 8% amount be added as income of the assessee which would end the justice - In terms of these observations, we partly allowed the ground no. 1 of the assessee. Addition on account of capital introduced in firm without considering the submission of the assessee - HELD THAT - The assessee however placed a general plea that the introduction of the capital is sourced from this account. There is no force in the argument assessee as he failed to place on record any cogent evidence as stated by the ld. DR. Not only that it has been observed that the income which is arising and offered in the return of income by the assessee is far less then this amount introduced in the firm. Therefore, the argument of the ld. AR is incorrect on fact and in the absence of any evidence and income being offered as arise from these unaccounted transactions as alleged and decided by us should be considered to substantiate the introduction of cash in the firm to the extent of that income and therefore, this ground of appeal is partly allowed and therefore, the AO is directed to reduce the addition to that extent of income decided as per Ground No. 1 above. In the result, Ground No. 2 is partly allowed.

Summary

Issues Involved:
1. Addition of Rs. 53,83,000/- under Section 68 of the Income Tax Act, 1961.
2. Addition of Rs. 5,50,000/- on account of capital introduced in the firm.

Issue-Wise Detailed Analysis:

1. Addition of Rs. 53,83,000/- under Section 68 of the Income Tax Act, 1961:

The assessee filed the return of income on 14.12.2013, declaring a total income of Rs. 3,00,580/-. Subsequently, the case was reopened under Section 148 of the Income Tax Act, 1961, due to an undisclosed bank account with Oriental Bank of Commerce, revealing cash deposits of Rs. 53,83,000/-. The assessee explained that the deposits were from business activities related to tractor parts sales and commissions. The AO did not accept this explanation and added the amount as unexplained cash credits under Section 68. The first appellate authority confirmed this addition, noting that the bank account was undisclosed and the assessee's explanations were insufficient. The ITAT, however, considered the assessee's argument that the deposits were business transactions and decided to treat the total cash deposits of Rs. 53,83,000/- as business turnover, applying an 8% profit rate as per Section 44AD, thereby partly allowing the assessee's appeal.

2. Addition of Rs. 5,50,000/- on account of capital introduced in the firm:

The AO added Rs. 5,50,000/- as unexplained cash credits, stating that the assessee failed to provide details of the source of this capital introduced in the firm M/s Dhansil Eicher Tractors. The first appellate authority upheld this addition, noting that the assessee's explanation of accumulated savings and agricultural income was not substantiated with evidence. The ITAT observed that the assessee did not provide cogent evidence linking the capital introduction to specific withdrawals from the bank account. Consequently, the ITAT partly allowed the appeal, directing the AO to reduce the addition to the extent of income decided under the first issue.

Conclusion:

The ITAT concluded that the total cash deposits of Rs. 53,83,000/- should be treated as business turnover, applying an 8% profit rate, and directed the AO to adjust the addition of Rs. 5,50,000/- accordingly. The appeal was partly allowed, providing relief to the assessee based on the revised assessment of income.