2025 (2) TMI 539 - AT - Income Tax

Addition u/s 68 - profit over suppressed sales - cash credits are not credited in the books of the assessee - whether the assessee has furnished any explanation about the nature and source thereof or has offered satisfactory explanation before the AO with respect to cash deposit? - HELD THAT - We find that the assessee has given an explanation but to consider the same as source of cash deposit in assessee s bank account can not be held as satisfactory explanation as the same is without any support of any cogent documents/evidence. Assessee has claimed that sufficient time was not provided by the AO. CIT(A) gave adequate opportunity to the assessee to offer evidence regarding cash deposit of Rs 78, 00, 000/- just before transferring the fund to TAHA Traders. However no further details to corroborate his submission were furnished before the CIT(A). Even before us no further evidence/documents were produced apart from documents that were filed before the AO/CIT(A). Assessee alternate plea that the cash deposit may be considered as turnover and the presumptive percentage of 8% be applied to determine the profits of the business is also misleading. If it is considered that the entire cash deposit is coming out of business sales then the assessee can no longer avail the benefit of section 44AD as he no longer remains engaged in the eligible business as per Explanation(b)(ii) of section 44AD of having a turnover of Rs 60 lakh being the threshold limit for the instant year. We hold that the assessee has failed to offer a satisfactory explanation with regard to the cash deposits. We therefore hold that the decision of the CIT(A) needs no interference and accordingly we sustain the addition u/s 68. Ground no 1, 2 and 4 are dismissed. Addition of presumptive tax @ 8% - Assessee s father had a turnover ranging from Rs 51 lakh in FY 2011-12 to Rs 62 lakh in FY 2013- 14 therefore it may be plausible that some portion of cash belonging to the father may have been deposited in assessee s bank account. The balance cash deposit of Rs 28, 14, 676/- is explained as out of assessee s own capital cash savings profit from business as also cash savings and business accruals and profit of Mr. Satanand Gupta (Father). In view of this we hold that the addition made by the AO at 8% on the remaining turnover is not justified and the same is accordingly deleted.

Summary

The appeal in this case was directed against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2014-15. The core issues considered by the Appellate Tribunal were the addition of Rs. 78,00,000 under section 68 of the Income-tax Act, 1961, and an adhoc addition of Rs. 2,25,174 on account of profit over suppressed sales. The Appellate Tribunal analyzed the facts of the case, where the assessee, a trader in agro/vegetable products, declared income under section 44AD without maintaining books of accounts. The Assessing Officer noted cash deposits in the assessee's bank account and made the aforementioned additions during assessment proceedings. The Commissioner of Income Tax (Appeals) upheld the additions, considering the lack of documentation regarding the source of the significant payment to TAHA Traders.The Tribunal heard the arguments of the assessee's counsel, who contended that the provisions of section 68 did not apply as the assessee was not required to maintain books of accounts under section 44AD. The counsel emphasized that the Assessing Officer's reliance on the balance sheet and profit and loss account was inappropriate. The assessee claimed the source of cash deposit was from various legitimate sources, including own capital, cash savings, and advances from parties.The Tribunal examined the legal framework and precedents, interpreting the applicability of section 68 in cases where the assessee maintains a cash book despite not maintaining formal books of accounts. The Tribunal found that the cash credits in the cash book fell within the ambit of section 68, supporting the Assessing Officer's actions.Regarding the Rs. 78,00,000 cash deposit, the Tribunal found the explanations provided by the assessee insufficient, lacking supporting evidence or documentation. The Tribunal also dismissed the alternate plea to consider the cash deposit as part of turnover under section 44AD, as it would disqualify the assessee from the benefits of the provision due to exceeding the turnover threshold.On the issue of the adhoc addition of Rs. 2,25,174, the Tribunal found that the balance cash deposit was adequately explained by the assessee's own capital, cash savings, and profits from business activities, as well as potential contributions from the late father. Therefore, the Tribunal deleted this addition.In conclusion, the Tribunal partly allowed the assessee's appeal, sustaining the addition of Rs. 78,00,000 under section 68 while deleting the adhoc addition of Rs. 2,25,174. The decision was pronounced on 12.02.2025.