2024 (5) TMI 1167 - AT - Income Tax

Unexplained cash deposits - CIT(A) Reducing the addition by applying the provision of section 44AD - Whether CIT(A) grossly erred in presuming the cash deposits as business receipt of the assessee? - HELD THAT - From the finding ofNCIT(A), it is clear that he treated the entire deposits in the bank account as business receipts and applied net profit @ 8% invoking the provisions of section 44AD of the Act. The assessee had prayed for peak credits be taken as income of the assessee since there were both deposits and withdrawals from bank accounts during the year. CIT DR urged for treating the entire cash deposits in the bank account as undisclosed income of the assessee without giving set off of cash withdrawal made during the year. We are unable to accept this submission of Ld.CIT DR. Law is well-settled that if there are both credit and debit entries in the bank account of the assessee, in that event peak credit may be taken as undisclosed income considering the facts of each case. But for making addition of entire cash deposits when the debit entries are also there, in our considered view such action by AO would not be justified. The assessee is not in appeal before us, nor any representation is made on his behalf. CIT DR could not controvert the finding of Ld.CIT(A) that the Investigation Wing had reported about the business activity carried out by the assessee. It is not the case where the Ld.CIT(A) had returned finding without having supporting material. The contention of DR that there was no business activity by the assessee is contrary to records. We therefore, do not see any reason for disturbing and/or reversing the finding of Ld.CIT(A). The grounds raised by the Revenue lacks merit hence, dismissed.

Summary

Issues Involved:
1. Restriction of addition on account of unexplained cash deposits for AY 2008-09.
2. Restriction of addition on account of unexplained cash deposits for AY 2009-10.

Summary:

Issue 1: Restriction of Addition on Account of Unexplained Cash Deposits for AY 2008-09
The Revenue appealed against the order of Ld.CIT(A) which restricted the addition to INR 35,76,000/- out of the total INR 4,47,71,100/- made by the AO on account of unexplained cash deposits. The AO had treated the entire cash deposits as undisclosed income due to non-compliance by the assessee and assessed the income u/s 144/147 of the Income Tax Act, 1961. The Ld.CIT(A) considered the cash deposits as business receipts and applied a net profit rate of 8% as per section 44AD of the Act. The Revenue contended that the provision of section 44AD was not applicable and that the entire cash deposits should be treated as undisclosed income. The Tribunal upheld the decision of Ld.CIT(A), stating that the entire deposits could not be treated as undisclosed income without considering the debit entries and that peak credit should be taken as income. The appeal by the Revenue was dismissed.

Issue 2: Restriction of Addition on Account of Unexplained Cash Deposits for AY 2009-10
The Revenue appealed against the order of Ld.CIT(A) which restricted the addition to INR 1,59,96,541/- out of the total INR 19,99,56,770/- made by the AO on account of unexplained cash deposits. The facts and issues in this case were identical to those in ITA No. 943/Del/2020 for AY 2008-09. The Tribunal adopted the same reasoning and decision as in the previous appeal, dismissing the appeal by the Revenue.

Final Decision:
Both appeals of the Revenue in ITA Nos. 943 & 944/Del/2020 for the Assessment Years 2008-09 & 2009-10 were dismissed.