2024 (12) TMI 502 - AT - Income Tax

Additions u/s. 69A - Addition merely based on the statement/offer made during survey u/s. 133A - according to AR, amount credited in the four bank accounts including the SBNs/cash deposited in bank accounts are sourced from business income of the assessee which was the stand of the assessee right from the beginning - HELD THAT - We are inclined to accept the explanation given by the assessee about the nature source of deposit during demonetization as business/trade receipt; and based on his offer to estimate income of the assessee on the total cash credits found in four bank accounts, we need to reasonably estimate the income of assessee and do not agree with the AO estimating income @ 8%, which is not based on any comparable cases. And in this regard, we take note of the results of earlier subsequent years business returns of the assessee and in the absence of any comparables, estimate income @ 5%. The AO is therefore directed to compute taxable income @ 5% of Rs. 7,79,23,921/- after reducing the returned income. Since total credits from his bank accounts have been brought to tax as business income, separate addition of Rs. 1,01,26,500/- is found to be unwarranted in the peculiar facts of the case and therefore, directed to be deleted. Appeal of the assessee is partly allowed.

Summary

Issues:
Assessment of additions under various sections including u/s. 69A of the Income Tax Act, 1961 for assessment year 2017-18.

Detailed Analysis:

Issue 1: Addition u/s. 69A of the Income Tax Act, 1961
The assessee appealed against the action of the Ld.CIT(A) confirming the AO's additions of Rs. 1,01,26,500/- u/s. 69A, Rs. 39,53,815/- as business income, and unproved 80C deduction of Rs. 1,19,408/-. The AO made these additions based on cash deposits during demonetization, survey findings, and alleged unproved business income. The assessee contended that the SBNs deposited were trade receipts, part of business income, and consistently maintained this stance. The Tribunal noted the absence of incriminating evidence during survey, the regular filing of returns by the assessee, and the explanation regarding the source of deposits. The Tribunal found the AO's separate addition u/s. 69A unsustainable, accepted the assessee's explanation, and directed income to be estimated at 5% of total cash credits in bank accounts, deleting the Rs. 1,01,26,500/- addition.

Issue 2: Estimation of Business Income
The AO estimated income at 8% of total credits in bank accounts, resulting in an additional income of Rs. 39,53,815/-. The assessee argued that only profit embedded in the turnover should be taxed, not the entire SBNs deposited separately. The Tribunal agreed with the assessee, considering the lack of incriminating evidence, the regular filing of returns, and the explanation provided. The Tribunal directed income to be estimated at 5% of total cash credits, rejecting the 8% estimation by the AO, as it lacked comparables and was not based on any comparable cases.

Conclusion:
The Tribunal partly allowed the appeal, deleting the addition made u/s. 69A and directing the computation of taxable income at 5% of total cash credits in bank accounts. The Tribunal emphasized the importance of considering the nature and source of deposits, rejecting the separate addition of SBNs as unwarranted and unsustainable. The decision was pronounced in Chennai on December 6th, 2024.