2024 (9) TMI 858 - AT - Income Tax

Addition being cash deposits as unexplained money u/s 69A - taxpayer who was engaged in the business of retail sale of ladies' garments - as argued cash deposited is out of opening balance, opening recovery and income earned during the year and offered for tax cannot be treated as unexplained money u/s 69A - HELD THAT - Since the assessee has claimed to have filed her return of income, on a presumptive basis, by showing income from the business of retail sale of ladies' garments, then in the absence of documentary evidence, it can be reasonably presumed that the cash deposits could be from unaccounted sales from the business which the assessee had not disclosed in the return of income. As relying on JAYESH JAGAT PAREKH VERSUS INCOME TAX OFFICER 34 (2) (1) , MUMBAI 2024 (8) TMI 1361 - ITAT MUMBAI we direct the AO to restrict the addition to 8% of the addition made u/s 69A of the Act. As a result, grounds raised in assessee s appeal are partly allowed.

Summary

Issues:
1. Validity of proceedings under section 147 of the Income Tax Act, 1961.
2. Addition of cash deposits as unexplained money under section 69A of the Income Tax Act, 1961.
3. Charging of interest under section 234A, 234B, and 234C of the Income Tax Act, 1961.
4. Initiation of penalty proceedings under section 271(1)(b) and 271(1)(c) of the Income Tax Act, 1961.

Detailed Analysis:
1. The appeal challenged the order passed under section 250 of the Income Tax Act, 1961, for the assessment year 2011-12. The assessee contended that the proceedings under section 147 were erroneous. The tribunal upheld the initiation of proceedings under section 147, citing the presence of new material for reassessment, following the decision in ACIT v. Rajesh Jhaveri Stock Brokers. The tribunal dismissed ground no. 1 raised in the appeal based on this analysis.

2. The tribunal considered the cash deposits made by the assessee and the lack of documentary evidence to support the source of these deposits. The tribunal referred to a similar case involving cash deposits in a bank account related to retail sales of garments. Following that decision, the tribunal directed the AO to restrict the addition to 8% of the cash deposits made by the assessee. Thus, grounds no. 2 and 3 raised in the appeal were partly allowed based on this reasoning.

3. Ground no. 4 raised in the appeal regarding the levy of interest under sections 234A, 234B, and 234C of the Act was deemed consequential and required no separate adjudication.

4. Ground no. 5 raised in the appeal concerning the levy of penalty under section 271(1)(c) of the Act was considered premature at that stage and was dismissed. The tribunal partly allowed the appeal by the assessee based on the above analysis.

This judgment provides a detailed analysis of the issues raised by the assessee, including the validity of proceedings under section 147, addition of cash deposits as unexplained money, levy of interest, and initiation of penalty proceedings under the Income Tax Act, 1961. The tribunal's decision was based on the specific facts and legal principles applicable to the case, ensuring a comprehensive examination of each issue raised in the appeal.