2019 (2) TMI 984 - AT - Income Tax

Addition u/s 68 - unexplained cash deposits in Bank Account - Held that - From the assessment order it is discerned that assessee is having source of her income from (i) cows, (ii) buffaloes, (iii) milk and milk products and (iv) sweet shop. The sweet shop income assessee has already offered in her regular return of income. So the source of deposit in the bank accounts must be inferred to have been from the aforesaid sources of income other than from sweet shop. Taking into consideration the overall facts and circumstances of the case, we are of the opinion that in order to find out the undisclosed income of the assessee the AO has to take into consideration the total deposits in the bank account and thereafter, reduce the turnover disclosed by the assessee from sweet shop, which will give the undisclosed turnover of the assessee. The entire undisclosed turnover cannot be the income of the assessee. Necessarily the undisclosed income that shall form part of the total income would be so taken after defraying all expenses that are incurred for earning such income by the assessee, therefore, taking into consideration the overall facts and circumstances of this peculiar case, Gross profit rate of 10% of the undisclosed turnover should be taken as the undisclosed income of the assessee and that amount has only to be taxed. The impugned order of CIT(A) is set aside on tis issue and the AO is directed to compute the gross profit as directed above. Appeal of assessee is partly allowed

Issues Involved:
1. Addition of ?35,99,000 on account of alleged unexplained cash deposits in Bank Account Nos. 01630110010983 and 01630100575160.
2. Addition of ?7,25,000 on account of alleged unexplained cash deposits in Bank Account No. 01630100023996.
3. Addition of ?1,70,451 on account of alleged unexplained cash deposits in daily deposit scheme (not pressed).
4. Addition of ?1,39,386 on account of alleged undisclosed interest income (not pressed).

Issue-wise Detailed Analysis:

1. Addition of ?35,99,000 on account of alleged unexplained cash deposits:
The assessee maintained three joint bank accounts with UCO Bank, Dum Dum Branch. The AO observed cash deposits of ?18,99,000 and ?17,00,000 in two of these accounts during the relevant period. The assessee claimed these deposits were from the sale of cows and buffaloes, supported by affidavits. The AO found the sale prices unusually high, compared them with market prices from websites, and concluded the explanation was not credible. Consequently, the AO treated the deposits as income from undisclosed sources and added ?35,99,000 to the assessee's income.

2. Addition of ?7,25,000 on account of alleged unexplained cash deposits:
The AO noted cash deposits of ?25,000 and ?7,00,000 in another bank account, claimed by the assessee to be from business cash surplus. The AO compared monthly sales figures provided by the assessee with the deposits and found discrepancies, concluding that the explanation was not satisfactory. Thus, the AO added ?7,25,000 as income from unexplained sources.

Judgment Analysis:
The Tribunal noted that the AO's findings were based on the fact that the assessee maintained a substantial number of cows and buffaloes, as confirmed by a departmental inspector's report. The Tribunal acknowledged the assessee's multiple sources of income, including a sweet shop, which was already taxed. It was determined that the deposits could be from other sources of income, such as the sale of cows and buffaloes.

The Tribunal decided that the entire undisclosed turnover could not be treated as income. Instead, a gross profit rate of 10% on the undisclosed turnover should be considered as the assessee's undisclosed income. The Tribunal directed the AO to compute the gross profit accordingly, partially allowing the assessee's appeal.

Conclusion:
The Tribunal set aside the CIT(A)'s order and directed the AO to compute the gross profit at 10% of the undisclosed turnover to determine the undisclosed income. The appeal was partly allowed, providing partial relief to the assessee. The judgment emphasized the need to consider all sources of income and reasonable profit margins when assessing unexplained cash deposits.

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