2024 (8) TMI 813 - AT - Income Tax

Reopening of assessment - Unexplained deposit of cash - HELD THAT - As the part of the fact of the business is accepted by the Revenue, there is no reason that why the amount of cash deposited could not be accepted as business income of the assessee when ₹ 14 lacs is accepted as business income. It is not disputed that this is the first year of the business of the assessee. It is not the fact that assessee has deposited ₹ 27,75,833/- in his bank account and it remain as balance in the bank account. Therefore, no reason to not to accept that the amount of cash deposit is also not from the business of the assessee. This is also for the reason that there is no evidence of purchase and sales with respect to the turnover. Accordingly, we find that the learned lower authorities are not correct in not accepting that the amount of cash deposited is out of the retail trading of Jeans. Determination of profit to be taxed in the hands of the assessee - We find that assessee himself has offered to be taxed at the rate of 8.65%. Therefore, we direct AO to tax the income of the assessee at the rate of 8.65% of the amount of cash deposited which amounts to ₹ 2,40,110/-. The addition to that extent is confirmed and balance addition required to be deleted. Accordingly, the orders of the learned lower authorities are reversed to that extent. Assessee appeal partly allowed.

Issues:
Reopening of assessment under Section 147
Addition of unexplained cash credit
Determination of taxable income based on cash deposit
Validity of assessing officer's calculation of profit
Acceptance of cash deposit as business income

Analysis:

Reopening of assessment under Section 147:
The appeal was filed against the appellate order passed by the National Faceless Appeal Centre, Delhi, dismissing the appeal against the assessment order under Section 143(3) read with Section 147 of the Income-tax Act, 1961. The appellant challenged the reopening of the assessment, arguing that the Assessing Officer erred in computing the total income. The appellant contended that the notice issued under Section 148 was bad in law. However, the lower authorities confirmed the action of the Assessing Officer, leading to the appeal.

Addition of unexplained cash credit:
The Assessing Officer added the cash deposit of Rs. 27,75,833 in the bank account as unexplained cash credit to the total income of the assessee. The appellant claimed that the cash deposit was from sales of jeans, but the Assessing Officer found discrepancies in the explanation provided. The appellant failed to establish the retail business and the correlation between debit and credit entries in the bank account. The addition was made based on the unexplained nature of the cash deposit.

Determination of taxable income based on cash deposit:
The Tribunal considered the appellant's claim that the cash deposit was from the retail trading of jeans. Despite the lack of evidence for purchase and sales, the Tribunal noted that the Revenue had accepted a certain turnover as business income. The Tribunal directed the Assessing Officer to tax the income at the rate of 8.65% of the cash deposited, resulting in a confirmed addition of Rs. 2,40,110.

Validity of assessing officer's calculation of profit:
The Assessing Officer's calculation of profit was questioned by the appellant, who argued that the peak figure should have been considered for determining the chargeable profit under Section 44AD. The Tribunal, however, directed the taxation of income based on the cash deposit amount, accepting the appellant's self-offered rate of 8.65%.

Acceptance of cash deposit as business income:
The Tribunal ultimately accepted the cash deposit as business income, considering the turnover accepted by the Revenue and the lack of evidence for purchase and sales. The Tribunal found no reason to reject that the cash deposit was not from the appellant's retail trading of jeans. The orders of the lower authorities were reversed to the extent of confirming the addition based on the cash deposit.

The appeal was partly allowed, with the Tribunal directing the taxation of income at the rate of 8.65% of the cash deposit amount. No other grounds were pressed before the Tribunal, and the order was pronounced on 29.07.2024.

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