2022 (8) TMI 80 - AT - Income Tax

Addition made to the income of the assessee on account of cash deposit remaining unexplained - addition u/s. 69A in respect of cash deposits made by an appellant by treating it as unexplained money - HELD THAT - Assessee still needs to substantiate his turnover with certain documentary evidences so that the correct estimation of his net profits by applying the rate specified under the section can be made. However in the peculiar facts of the case before us the assessee was asked to justify this fact after a lapse of six years in re-assessment proceedings. Considering the fact that he was a very small businessman, operating in unorganized sector, it was asking for too much to produce bills to substantiate his turnover in cash that too after a lapse of six years. In these peculiar facts and circumstances we are of the view that having accepted the fact that the assessee had conduced business to the tune of Rs. 20 lakhs odd which in all probability was conducted in cash and the department having found out no other source of income available with the assessee, the entire deposits in cash in the bank can be safely attributed to the business receipts of the assessee only. We may add that very small businessmen like the assessee for whom the law itself provides a convenient method for declaring their incomes by returning taxes on at a presumptive rate, thus doing away with the onerous requirement of maintaining books of account and other documents, noting that it acted as a detterent to such businessmen from declaring their income, the Revenue is expected to take a considerate and holistic view on such matters and not waste its efforts and energies in making such paltry additions. Addition on account of alleged unexplained cash deposit be deleted. Appeal of assessee allowed.

Summary

Issues:
Addition of unexplained cash deposit amounting to Rs. 18,66,000 in the income of the assessee.

Analysis:
The appeal was filed against the order passed by the Commissioner of Income Tax (Appeals) pertaining to Assessment Year 2010-11, specifically challenging the addition made to the income of the assessee on account of unexplained cash deposit. The Assessing Officer reopened the case based on information that the assessee had deposited Rs. 18,66,000 in an ICICI Bank account. The assessee claimed the cash deposits were from business activities but failed to provide evidence. The CIT(A) upheld the addition, stating the assessee couldn't substantiate the source of the cash deposits from business turnover. The appellant argued being a small trader, maintaining books of accounts was not mandatory, and previous cases had limited additions to a percentage of turnover. However, the CIT(A) found the appellant's explanations insufficient and confirmed the addition.

The Tribunal noted that the Revenue accepted the income returned by the assessee at a 5% profit rate, acknowledging the assessee as a small businessman likely dealing predominantly in cash. The Tribunal recognized that small businessmen in unorganized sectors often operate primarily in cash without extensive bookkeeping requirements. Given the circumstances and the lack of alternative income sources, the Tribunal concluded that the entire cash deposits could be attributed to the business receipts of the assessee. Emphasizing the practical challenges faced by small businessmen in maintaining detailed records, the Tribunal found that expecting the assessee to produce evidence of cash turnover after six years was unreasonable. Therefore, the Tribunal decided to delete the addition of Rs. 18,66,000 on account of unexplained cash deposit.

In conclusion, the Tribunal allowed the appeal filed by the assessee, holding that the addition of Rs. 18,66,000 on the grounds of alleged unexplained cash deposit should be deleted. The judgment was pronounced on 30-06-2022.