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2016 (12) TMI 738 - AT - Income TaxUndisclosed cash deposits - Held that - On perusal of the Bank statements and narration in those bank statements, it is noticed that the purchases of the assessee was through cheque which establishes the trading business of the assessee. It is further noticed that assessee had furnished the sales accounts, purchase accounts and cash flow statements, bank A/c etc before the authorities below. It is further noted that the assessee is a retail trader and the assessee is not required to maintain books of account as per provision of Section 44AF and the case of the assessee fall u/s 44AF of the Act. As noted that in the case of ITO Kishangarh vs. Sh. Pushpendra Kumar Jain (2016 (1) TMI 1190 - ITAT JAIPUR), the ITAT Jaipur Bench had treated the cash deposit in the bank account of the assessee as undisclosed turnover of the assessee and directed to apply the gross profit rate @10%. Thus taking into consideration all relevant facts and also the decision of Coordinate Bench in the case of ITO Kishangarh vs. Sh. Pushpendra Kumar Jain (supra), the AO is directed to estimate the net income of assessee @ 10% on the turnover of ₹ 23.05 lacs. Thus the appeal of the assessee is partly allowed.
Issues Involved:
1. Validity of the order under Sections 144/147. 2. Addition of ?22,19,000 on account of cash deposits in the bank account. 3. Charging of interest under Sections 234B, 234C, and 234D. Issue-wise Detailed Analysis: 1. Validity of the Order under Sections 144/147: The assessee initially raised grounds challenging the order under Sections 144/147 on the basis of jurisdiction and limitation. However, during the hearing, these grounds (Ground No. 1.1 and 1.2) were not pressed by the assessee's representative and hence were dismissed as not pressed. 2. Addition of ?22,19,000 on Account of Cash Deposits: The primary issue revolved around the addition of ?22,19,000, which the Assessing Officer (AO) treated as unexplained income. The AO observed cash deposits totaling ?24,33,000 in the assessee's bank account and added this amount to the income under the head "income from other sources" due to the lack of explanation from the assessee. Upon appeal, the CIT(A) partially allowed the appeal, giving relief of ?2,14,000, which was the amount of cash withdrawals that could be redeposited. The CIT(A) did not accept the assessee's claim of business receipts due to the absence of supporting bills and vouchers. In the ITAT proceedings, the assessee argued that the deposits were business receipts from his building material supply business, with purchases made through account payee cheques. The assessee provided a cash flow statement and other documents supporting his claim. The ITAT noted that the AO, in the remand report, acknowledged the contentions but highlighted the absence of bills and vouchers. The ITAT found that the assessee was a retail trader not required to maintain detailed books under Section 44AF. The ITAT referred to the decision in the case of ITO Kishangarh vs. Shri Pushpendra Kumar Jain, where cash deposits were treated as turnover and a gross profit rate of 10% was applied. Following this precedent, the ITAT directed the AO to estimate the net income at 10% of the turnover of ?23.05 lacs, thus partly allowing the appeal. 3. Charging of Interest under Sections 234B, 234C, and 234D: The assessee contested the charging of interest under Sections 234B, 234C, and 234D. The ITAT noted that these interests are consequential and mandatory in nature. Therefore, the ground regarding the interest was dismissed. Conclusion: The ITAT partly allowed the appeal by directing the AO to estimate the net income at 10% of the turnover, recognizing the assessee's business activities and the precedent set by similar cases. The appeal was partly allowed, and the order was pronounced in the open court on 26/09/2016.
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