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2023 (3) TMI 207 - AT - Income TaxDetermination of income - Addition u/s 68 - cash deposits in bank unexplained - assessee submitted that the entire amount of cash deposit cannot be assumed as income of the assessee and as there were various withdrawals from the bank by the assessee which were available with the assessee for re-deposit - whether the amount of cash deposit represents the income of the assessee in its entirety? - HELD THAT - If the cash deposit is treated as income then on the same logic the withdrawal from the bank in cash should be treated as an expense until and unless some contrary information is available on record. These contrary informations may include the expenses incurred by the assessee for his personal purposes such as foreign travelling, household expenses, marriages, education or any other expense of personal nature. Likewise, there is also a possibility of having withdrawn the money by the assessee from the bank for the purpose of making some investment which is of capital nature. However, the authorities below have not gone/ considered all the factual aspects but reached to the conclusion that the cash deposits represent the income of the assessee. As relying on MAHESH K. BHUTIYA PARTH VERSUS THE INCOME TAX OFFICER WARD-2 (3) , PORBANDAR 2022 (8) TMI 80 - ITAT RAJKOT we are inclined to adopt the same basis to determine the income of the assessee. Thus, we work out the income of the assessee at 8% of total cash deposit. Hence, the ground of appeal of the assessee is partly allowed.
Issues Involved:
1. Delay in filing the appeal. 2. Addition of Rs. 29,56,440/- as unexplained investment under Section 69 of the Income Tax Act, 1961. Detailed Analysis: Issue 1: Delay in Filing the Appeal The appeal was delayed by 226 days. The assessee attributed the delay to two reasons: being illiterate and relying on a tax consultant who failed to file the appeal on time. The assessee realized the delay only upon receiving a recovery notice. The delay was partly due to the COVID-19 lockdown, which the Supreme Court had condoned for a certain period. The Tribunal noted that 65 days of the delay fell within this period, leaving a balance delay of 161 days. The Tribunal was not convinced by the assessee's illiteracy as a valid reason, citing that ignorance of law is not an excuse. However, they acknowledged that the tax consultant's failure, although unsupported by documentary evidence, was not contradicted by the Revenue. The Tribunal emphasized that the revenue had treated the entire cash deposit as income without a scientific basis, potentially leading to double addition. They highlighted that the hardship faced by the assessee due to the delay was disproportionate to the mistake and that a meritorious case should not be dismissed on technical grounds. Citing precedents, the Tribunal condoned the delay and admitted the appeal for hearing on merits. Issue 2: Addition of Rs. 29,56,440/- as Unexplained Investment The assessee, an individual previously engaged in the hosiery business and later a fruit hawker, did not file a return for the relevant year. The Assessing Officer (AO) found cash deposits totaling Rs. 29,56,440/- in the assessee's bank account and treated these as unexplained cash credits under Section 68 of the Act, assessing the income accordingly. The assessee failed to respond to notices issued under Sections 148 and 142(1) of the Act, leading to an assessment under Section 144 r.w.s. 147. On appeal, the CIT(A) confirmed the AO's order, noting that the assessee did not provide sufficient evidence to justify the cash deposits. The assessee's submission of a profit and loss account and balance sheet was deemed insufficient without supporting documents like a cash book or bank statements. The CIT(A) relied on various judicial precedents to uphold the addition, emphasizing the lack of correlation between the claimed business income and the cash deposits. Before the Tribunal, the assessee argued that the entire cash deposit should not be considered income, suggesting that previous withdrawals could account for some of the deposits. The Tribunal noted that the authorities had not considered the withdrawals and emphasized that withdrawals should be treated as expenses unless contrary evidence is available. They referenced a similar case where the Tribunal had adopted a presumptive rate to determine income, considering the nature of small businesses and the practical difficulties in maintaining detailed records. Following this precedent, the Tribunal determined the income at 8% of the total cash deposits, amounting to Rs. 2,36,500/-. Consequently, the Tribunal partly allowed the assessee's appeal, reducing the addition significantly. Conclusion: The Tribunal condoned the delay in filing the appeal and admitted it for hearing on merits. They partly allowed the appeal by determining the income based on a presumptive rate, significantly reducing the addition from Rs. 29,56,440/- to Rs. 2,36,500/-. The judgment emphasized the importance of a fair assessment and the need to consider practical realities in cases involving small businesses.
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