2023 (2) TMI 637 - AT - Income Tax

Reopening of assessment u/s 147 - cash deposits unexpalined - as submitted cash deposited by the assessee in his bank account payments were made for purchase of vegetables - HELD THAT - As in order to prove the bona fides of the business transaction the assessee submitted the entire books of accounts before the AO during the course of assessment proceedings as well as before the ld. CIT(A) and no defect was pointed out by the lower authorities in the books of account produced by the assesse. It is a trite law that once the assessee has offered income u/s 44AD of the Act on presumptive basis then assessee is not required to maintain books of account on a regular basis but the assessee produced the books of account before the lower authorities As noted from the assessment order that the assessee had paid interest on the outstanding balance of the bank account maintained by the assessee and it can be seen assessee was having cash balance with him. It is noted that the AO had considered certain percentage at which interest had been paid by the assessee i.e. 22.20% but the AO has not given any basis of arriving at such interest percentage. The Bench finds from the available records that during the course of hearing the assessee had supplied all the details before the lower authorities like books of accounts details of financial statement and bank account etc. but it was ignored. It is also noted that the assessee had made elaborate submissions before the ld. CIT(A) which were also not controverted by the ld. CIT(A) in his order. In view of the above facts and circumstances of the case the Bench finds that the addition sustained amounting by the ld. CIT(A) is deleted. - Decided in favour of assessee.

Summary

Issues Involved:
1. Reopening of the case under Section 147 of the Income Tax Act, 1961.
2. Issuance of notice under Section 148 without proper sanction under Section 151 of the Income Tax Act.
3. Addition of Rs. 13,83,300/- as unexplained cash deposits.

Issue-wise Detailed Analysis:

1. Reopening of the case under Section 147 of the Income Tax Act, 1961:
The assessee contested the reopening of the case under Section 147, claiming it was illegal, unjustified, and arbitrary. However, the Tribunal observed that this ground was not raised before the Commissioner of Income Tax (Appeals) [CIT(A)] and thus dismissed it without adjudication.

2. Issuance of notice under Section 148 without proper sanction under Section 151 of the Income Tax Act:
Similar to the first issue, the assessee argued that the notice under Section 148 was issued without proper sanction under Section 151, rendering it illegal and unjustified. This ground was also dismissed by the Tribunal as it was not raised before the CIT(A).

3. Addition of Rs. 13,83,300/- as unexplained cash deposits:
The Tribunal provided an in-depth analysis of this issue. The assessee argued that the addition was made without considering bank withdrawals and cash sales. The CIT(A) had restricted the addition to Rs. 13,83,300/- from the original Rs. 17,01,150/- after verifying the net cash deposits.

The assessee contended that the entire books of accounts were prepared and submitted, and no defects were pointed out by the lower authorities. The Tribunal noted that the assessee, a vegetable vendor, declared income under Section 44AD on a presumptive basis, which does not require maintaining regular books of accounts. However, the assessee still prepared and submitted the books of accounts to substantiate cash receipts, which were not found defective by the authorities.

The Tribunal observed that the AO failed to provide a basis for the interest percentage and ignored the details provided by the assessee, including books of accounts, financial statements, and bank account details. The Tribunal concluded that the lower authorities did not adequately consider the submissions and evidence provided by the assessee.

In light of these findings, the Tribunal deleted the addition of Rs. 13,83,300/- sustained by the CIT(A), allowing the assessee's appeal on this ground.

Conclusion:
The Tribunal allowed the appeal of the assessee partly, primarily on the issue of the addition of unexplained cash deposits, while dismissing the grounds related to the reopening of the case and issuance of notice under Sections 147 and 148. The decision emphasized the importance of considering all submitted evidence and the proper application of legal provisions.