2021 (10) TMI 459 - AT - Income Tax

Unexplained cash credit u/s 68 - HELD THAT - It is an admitted fact that the A.O. in the preceding as well as succeeding assessment years and also in the remand report for the impugned assessment year has mentioned that assessee is in the business of taxi operation. There is no other evidence before the A.O. that the assessee is engaged in any other activity other than taxi plying. Further the assessee is also not maintaining any books of account. Since the assessee in the instant case is engaged in the business of taxi operation as per the preceding and succeeding assessment years and as per the remand report of the A.O. for the impugned assessment year and the assessee is not maintaining any books of account, therefore, the entire deposits in the bank accounts is the business receipt of the assessee from taxi operation. Since there is a difference of ₹ 40,41,371/- between the business receipt shown at ₹ 22,20,677/- and total deposit of ₹ 62,62,048/-, therefore, in my opinion, estimation of profit @ 25% of the total difference will meet the ends of justice. Grounds raised by the assessee are accordingly partly allowed.

Issues Involved:
1. Unexplained cash credit addition of ?40,41,371/-
2. Addition of undisclosed interest income of ?11,491/-
3. Procedural and jurisdictional errors claimed by the assessee

Issue-Wise Detailed Analysis:

1. Unexplained Cash Credit Addition of ?40,41,371/-:
The assessee filed a return of income for the A.Y. 2009-10 declaring a total income of ?1,90,314/-. The case was selected for scrutiny based on AIR information regarding a cash deposit of ?39,15,000/- in the assessee's savings bank account. Despite multiple notices, the assessee failed to provide requisite details about the nature of business activities and the source of cash deposits. Consequently, the AO passed an ex-parte assessment order, adding ?40,41,371/- as unexplained cash credit and ?11,491/- as undisclosed interest income, resulting in a total assessed income of ?42,43,176/-.

The assessee appealed against the assessment order, but the CIT(A) also passed an ex-parte order due to non-appearance by the assessee. The Tribunal remanded the case back to the CIT(A) for a speaking order. During remand proceedings, the assessee submitted additional evidence, but the CIT(A) upheld the addition of ?40,41,371/- as unexplained cash credit. The CIT(A) noted that the assessee failed to satisfactorily explain the sources of cash credits despite several opportunities.

The assessee argued that the cash deposits were business receipts from taxi operations and that only a profit percentage should be taxed, not the entire deposit amount. The Tribunal found merit in this argument, noting that the AO had accepted the assessee's taxi business in preceding and succeeding years and that the assessee was not maintaining books of account. Citing similar cases, the Tribunal concluded that only a profit percentage should be added as income, not the entire deposit amount. The Tribunal estimated a profit rate of 25% on the unexplained cash credit difference of ?40,41,371/-.

2. Addition of Undisclosed Interest Income of ?11,491/-:
The CIT(A) sustained the addition of ?11,491/- as undisclosed interest income but reduced it to ?6,840/- after considering ?4,651/- already offered for taxation by the assessee. The Tribunal did not specifically address this issue further, implying acceptance of the CIT(A)'s adjustment.

3. Procedural and Jurisdictional Errors Claimed by the Assessee:
The assessee raised several procedural and jurisdictional issues, including the improper service of notice under section 143(2) and the AO's alleged failure to consider the business nature of the cash deposits. The Tribunal focused on the substantive issue of unexplained cash credits and did not provide a detailed analysis of these procedural claims. However, the Tribunal's decision to estimate a profit percentage on the unexplained cash credits indirectly addressed the assessee's concerns about the AO's approach.

Conclusion:
The Tribunal partly allowed the appeal, directing that only a profit percentage (25%) of the unexplained cash credit difference of ?40,41,371/- be added to the assessee's income, rather than the entire amount. The Tribunal upheld the CIT(A)'s adjustment regarding the undisclosed interest income. The procedural and jurisdictional issues raised by the assessee were not explicitly resolved but were indirectly addressed through the Tribunal's substantive decision on the unexplained cash credits.

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