2016 (10) TMI 252 - HC - Income Tax

Unexplained source of huge Cash Deposit in Bank Account - assessee declared his income u/s 44AF - Whether Presumptive charge of income u/s 44AF distinguishable from arriving at chargeable income u/s 29 - Tribunal decided the issues raised before it against the assessee - Held that - AS held by ITAT that when the assessing officer had sought from the assessee the source of the cash deposits to the tune of ₹ 18,31,500/- made by him in his bank account, virtually no documentary proof regarding purchases/sale of furniture was submitted by him. Photocopies of only a few of the bills which were produced pertained to the current year only. The names of the parties from whom the assessee had purchased the material were not disclosed. The Tribunal noted that throughout the year, on different dates the assessee had made deposits of identical amounts of ₹ 49,500/- and it was only at the fag end of the financial year i.e. on 02.02.2008 and 13.02.2008 that the assessee had made withdrawals of ₹ 1,50,000/- and ₹ 2,00,000/-. The assessee was also found to have failed to prove any purchases made by him from his withdrawals especially when these withdrawals were made only in February, 2008 i.e. at the fag end of the financial year. The Tribunal further noted that in his return, the assessee had shown sales of ₹ 18,82,800/- with net profit of ₹ 1,08,000/- and with this low profit margin, without making purchases no sale could have possibly been effected by the assessee. Thus, the cash deposited by the assessee in his bank account was not believed to be from sales effected by him. The assessee s plea that he usually purchased furniture on credit basis was also considered and rejected as no evidence of making any purchases on credit had been filed by him before any of the authorities. The assessee was also found to have established no nexus with the receipts/turn over and the deposited cash in his bank account. Link evidence to show that the sales were directly related to the cash deposits made by him in his bank account, was also found missing by the Tribunal. In view of the afore-referred facts, the Tribunal held that the assessee s case was distinguishable from Surinder Pal Anand s case ( 2010 (6) TMI 404 - Punjab and Haryana High Court ). Accordingly, the appeal of the revenue was allowed and the addition made by the assessing officer was restored.

Summary

Issues Involved:
1. Distinguishing 'presumptive charge' of income under Section 44AF from 'chargeable income' under Section 29 of the Income Tax Act, 1961.
2. Whether the Tribunal's decision violates judicial discipline by contradicting the ratio laid down in CIT vs. Surinder Pal Anand (2010) 48 DTR 135 (P&H).

Issue-wise Detailed Analysis:

1. Distinguishing 'presumptive charge' of income under Section 44AF from 'chargeable income' under Section 29 of the Income Tax Act, 1961:

The appellant, engaged in retail trading of wooden furniture, filed a return declaring an income of ?1,17,622 for the assessment year 2008-09 under Section 44AF, which allows for presumptive taxation for small retailers with turnover less than ?40 lakhs. The assessing officer, suspecting escaped income, issued a notice under Section 148. The appellant reiterated the declared income, claiming no need to maintain books of accounts under Section 44AF. However, the assessing officer, upon examining the appellant's bank account, found substantial cash deposits totaling ?18,31,500, which the appellant claimed were from sales. The officer, finding insufficient documentary proof and unexplained sources, invoked Section 69A, adding the cash deposits to the appellant's income. The Commissioner initially sided with the appellant, citing the lack of requirement to maintain detailed accounts under Section 44AF, but the Tribunal reversed this, emphasizing the need for credible evidence linking sales to the cash deposits. The Tribunal noted identical cash deposits and late withdrawals, questioning the plausibility of the appellant's claims without supporting documents.

2. Whether the Tribunal's decision violates judicial discipline by contradicting the ratio laid down in CIT vs. Surinder Pal Anand (2010) 48 DTR 135 (P&H):

The appellant argued that the Tribunal's decision contradicted the precedent set in CIT vs. Surinder Pal Anand, where the court ruled in favor of the taxpayer under similar circumstances. However, the Tribunal distinguished the current case, noting the appellant's failure to provide substantial evidence of sales or purchases, unlike in Surinder Pal Anand's case. The Tribunal highlighted the lack of any credible documentation or linkage between the claimed sales and the cash deposits. The Tribunal's findings were based on specific facts, such as the pattern of deposits and the absence of withdrawals until the end of the financial year, which were not satisfactorily explained by the appellant. Consequently, the Tribunal upheld the assessing officer's addition to the income, emphasizing the factual differences from the cited precedent.

Conclusion:

The High Court, upon reviewing the Tribunal's order, found that the Tribunal had made a fact-based decision, which was within reasonable bounds and could not be deemed perverse or absurd. The High Court concluded that no substantial question of law arose from the appeal, leading to its dismissal. The Tribunal's decision was thus upheld, reaffirming the need for credible evidence to substantiate claims under presumptive taxation provisions.