2023 (11) TMI 339 - AT - Income Tax

Unexplained cash deposits into the bank accounts - assessee has not filed any return of income u/s 139(1) and even not responded to the various opportunities provided under receipt of notice - CIT(A) deleted additions - HELD THAT - We have also taken note of the AO observation that assessee has not shown the cash sales in the TAR whereas there is no such column meant for disclosing cash deposit into bank or cash sales in the Tax Audit Report. We also observe from the records before us that the assessee has collected VAT /sales tax on the total sales including cash sales which was duly in the the VAT Returns filed before the competent authority and all these evidences were ignored in the by the AO during the remand proceedings and so much so that the AO has not allowed any opportunity to the assessee during remand proceedings and reiterated same observations in the remand report as were recorded during the assessment proceedings. We note that TCS has been deducted u/s 206 CJ and 206 CH from the purchase of iron ore lumps totaling to Rs. 2,29,54,031/- made by the assessee from the various suppliers which was duly recorded in the books maintained by the assessee. We note that the assessee has paid for fee for professional and technical services which is liable for TDS u/s 194J which was also added and is included in the addition made - We have also examined the evidences in the form of bank possession notice which proved that the premises of the assessee were attached after the assessee was evicted from the said premises. We observe that the CIT(A) has rightly appreciated all these evidences filed by the assessee and taken a correct and reasoned view in the matter. In view of this, we are inclined to uphold the order of Ld. CIT(A) by dismissing the grounds raised by the revenue.

Summary

Issues Involved:
1. Deletion of addition on account of unexplained cash deposits.
2. Deletion of addition based on Form 26AS.
3. Deletion of addition on account of estimated income for non-filing of return.

Summary:

1. Deletion of Addition on Account of Unexplained Cash Deposits:
The revenue challenged the deletion of an addition of Rs. 1,52,58,698/- made by the Assessing Officer (AO) due to unexplained cash deposits in the assessee's bank accounts. The AO had treated the amount as unexplained cash credit under Section 69 of the Income Tax Act because the assessee did not file a return of income or respond to notices. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition after considering the assessee's submission that the cash deposits represented sale proceeds of crushed iron ore lumps. The CIT(A) noted that the AO failed to scrutinize the documents properly and did not doubt the audited books of accounts during the remand proceedings.

2. Deletion of Addition Based on Form 26AS:
The revenue also contested the deletion of an addition of Rs. 2,30,97,280/- based on Form 26AS, which the AO had treated as undisclosed business income. The CIT(A) observed that the AO misunderstood the content of Form 26AS, which included both Tax Deducted at Source (TDS) and Tax Collected at Source (TCS). The CIT(A) found that the amount represented purchases of iron ore lumps from various parties and interest income from fixed deposits, which were duly accounted for in the books of accounts. The CIT(A) directed the AO to delete the addition, noting that the AO committed a grave error by treating TCS as TDS.

3. Deletion of Addition on Account of Estimated Income for Non-Filing of Return:
The revenue further disputed the deletion of an estimated addition of Rs. 10,00,000/- made by the AO due to the assessee's non-filing of return. The CIT(A) noted that the assessee's books of accounts were audited under Section 44AB, but the return could not be filed due to heavy losses and recovery proceedings initiated by the bank, which led to the vacation of premises. The CIT(A) found that the AO did not point out any defects in the books of accounts during the remand proceedings and directed the deletion of the estimated addition.

Conclusion:
The Income Tax Appellate Tribunal (ITAT) upheld the order of the CIT(A), dismissing the revenue's appeal. The ITAT agreed with the CIT(A)'s findings that the cash deposits were from the sale proceeds of iron ore lumps, the addition based on Form 26AS was erroneous, and the estimated addition was unjustified. The appeal of the revenue was dismissed, and the order was pronounced in the open court on 6th November 2023.