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TMI Blog2015 (11) TMI 1904X X X X Extracts X X X X X X X X Extracts X X X X ..... siness, which was not doubted by the tax authorities. In this line of business, contractors do get advances to execute the works undertaken by them. AO/CIT(A) had taken the cash deficit method to arrive the undisclosed income. This is not the right method. They should have investigated whether assessee retains the deposits for long period as unutilized. On analyzing the bank statement, we find that following the deposits, assessee also made several withdrawals both by cheque as well as by cash. Even to the extent of Rs. 15 lakhs in a day. In the civil business contract, they have to make payment for labour and materials invariably by cash. Cash deposit as per peak deficit cash balance stood as on 09/03/09 was Rs. 28,05,679/-. It reduces to Rs. 8,80,000/- by 20/03/09. Subsequently, there was cash withdrawals as well. Tax authorities are going by one side of accounting and completely overlooking the other side. Considering the gross receipts of the business and peak deficit cash balance, we reject the method adopt by the AO and consider that the cash deposits were made only for the business and further utilized only for the business. The first condition is that assessee should mainta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under reference, the appellant shown to have made certain deposits into bank account (bearing No. 1465172000000292) with Karur Vysya Bank, AS Rao Nagar Branch, Hyderabad, which was quantified at Rs. 31,04,179, and was treated as unexplained for not furnishing the required information. The appellant's question is that where the turnover recorded by the appellant, for filing the return of income as per 44AD i.e. Rs. 35,52,000, which is higher than the amounts reflected though the said bank account (Rs. 31,04,179), the said amount cannot be treated as unexplained credits. The answer would be clear and straight if the question is unambiguous. In this context, it is relevant to refer to the fact of the case that not only the assessee failed before the AO to explain the deposits into the bank account, with the help of the needed and relevant information. related to such contract works, by connecting such activity to the deposits but also failed to prove the same before the appellate authorities. No relevant information was filed before the CIT(Appeals) to indicate that the activity of contract works relate to the cash deposits, specially the cash deposits made into the bank account, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere are no adequate receipts of business to the appellant during the year, to support the deposits, specially the cash deposits in the bank accounts and as such the cash deposits into the said bank accounts represent the unexplained income in the form of unexplained credits, for the year under reference. However, the quantum of such credits, found may be restricted to the amounts of Rs. 31,04,179 based on the peak of the deficit cash balances as referred. Thus the addition of Rs. 31,04,179 treating the cash deposits into bank accounts, as unexplained credits is sustained the appellant fails on this ground of appeal. 5. Aggrieved with the above order, assessee has raised the following grounds: 1. On the facts and in the circumstances of the case the order of the Commissioner of Income Tax (Appeals) is erroneous, illegal and unsustainable in law. 2. The CIT(A) erred in sustaining the addition of Rs.31,04,179 made by the AO as unexplained cash credits. The CIT(A) failed to appreciate that the appellant in his individual status had handled only small miscellaneous works and it is not practical to have contracts. for such works. 3. The finding of the CIT(A) that the deposits in the bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business was Rs. 35,52,000/-. AO also totally ignored the fact that assessee also withdraws cash regularly. The closing balances in the bank accounts reaching the minimum level shows that the assessee utilizes the same for running business. 8.3 The statutes allows and gives benefits to the small business people like the assessee to estimate their income so that they fulfill the statutory obligation of taxation and they also enjoy the benefits like, they don t have to maintain books of account as stipulated u/s 44AA, they are not subject to payment of advance tax under the provisions of Chapter XVII C. 8.4 As far as the cash deposits in the bank are concerned, we have noticed that the assessee has gross receipts of Rs. 35,52,000/- from the construction business, which was not doubted by the tax authorities. In this line of business, contractors do get advances to execute the works undertaken by them. AO/CIT(A) had taken the cash deficit method to arrive the undisclosed income. This is not the right method. They should have investigated whether assessee retains the deposits for long period as unutilized. On analyzing the bank statement, we find that following the deposits, assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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