Cash Deposits should not be assessed U/s. 68 when cheque deposits were accepted as business turnover: ITAT, Hyderabad


There is no reason cash deposits should be assessed U/s. 68 when cheque deposits were accepted as business turnover. We find the reason given by the Ld.CIT(A) in treating the entire amount as turnover is reasonable on the facts of the case.

Income Tax Officer, Ward-4, … vs Shaik Zameer, Nellore on 18 May, 2018

           IN THE INCOME TAX APPELLATE TRIBUNAL
                    HYDERABAD BENCHES
               CIRCUIT BENCH "A", AT TIRUPATI

         BEFORE SHRI D. MANMOHAN, VICE PRESIDENT
                           AND
         SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER

                       I.T.A. No. 1019/HYD/2017
                        Assessment Year: 2011-12

          Income Tax Officer,         Sri Shaik Zameer,
          Ward-4,                Vs   Kovur (V) & (M),
          NELLORE                     NELLORE DIST.,
                                      [PAN: BCVPS7634G]


              (Appellant)                   (Respondent)

             For Revenue      : Shri V. Rama Mohan, DR
             For Assessee     : NONE

              Date of Hearing           :    16-05-2018
              Date of Pronouncement     :    18-05-2018

                                ORDER

PER B. RAMAKOTAIAH, A.M. :

This is an appeal by Revenue against the order of the Commissioner of Income Tax (Appeals)-Tirupati, dated 31-03-2017, treating the deposits made in the bank account as business turnover, whereas AO was of the opinion that these are unexplained income U/s. 68 of the Act.

2. Condonation: The appeal was filed with a delay of four days. It was explained that the charge was held as additional charge and there was a delay in getting authorization from CIT.

I.T.A. No. 1019/Hyd/2017 :- 2 -:

Considering the affidavit filed by AO, the delay is condoned and appeal memo is admitted.

3. Briefly stated, assessee is deriving income from transport contracts and declared total income of Rs. 3,32,420/-. In the scrutiny assessments, AO came to know that assessee has lot of deposits in the bank accounts both cheques and cash. The cheque deposits were accepted as business turnover and income was estimated U/s. 44AD of the Act at Rs. 6,13,395/- but the cash deposits were brought to tax U/s. 68 to an extent of Rs. 60,57,696/-.

4. Ld.CIT(A) after the appeal was preferred, gave relief by treating cash deposits also as turnover and determined the total income as under:

“4. All the grounds relate to two additions made by AO based on deposits in appellant’s bank accounts. As per the Assessment Order appellant maintained 3 bank accounts and certain amounts were found to be deposited as under:

S.No. Name of the Total Deposits Cash deposits Bank made in Bank out of the total during the F.Y. deposits made relevant to the in each bank A.Y. 2011-12

1. IDBI Bank Ltd 56,55,759 40,84,500

2. Axis Bank Ltd., 19,73,196 19,73,196 Nellore Total deposits 1,37,25,131 60,57,696 4.1 Since the appellant could not explain the sources for the above deposits, the AO made two additions as under:

I.T.A. No. 1019/Hyd/2017 :- 3 -:

a) For cash deposits of Rs. 60,57,696/-, they were added as unexplained income U/s. 68.

b) The balance amounts of Rs. 76,67,435/- are treated as gross contractual receipts and income is estimated U/s. 44AD at Rs. 6,13,395/-.

4.2. Several opportunities were issued to the appellant, but appellant chose not to appear. Accordingly, the appeal is disposed off based on the facts and merits.

4.3. Firstly, it is seen from the assessment record that the said bank account contain several debits and credits. Even the account where Rs. 40,84,500/- cash is deposited, thee were several withdrawals in cash regularly. No peak credit is worked out by AO. Further, when deposits other than cash are treated gross contractual receipts, there is no reason why deposits in cash also be taken as gross contractual receipts and income be estimated at reasonable basis. It is the claim of the appellant that all receipts pertain to his business in transportation and all receipts are income. Further, the AO estimated income on receipts on which appellant has declared income and hence made double addition. The appellant disclosed net profit @8% U/s. 44AD. It is held that all the receipts in bank account be treated as appellant’s turnover/gross receipts and income be estimated @10% of the same.

Credits in Bank account : 1,37,25,131/-

Income @ 10%                          :       13,72,513/-
Less: Income already offered          :       1,15,450/-
                                         ----------------
Addition                              :     12,57,063/-
                                         ----------------

Accordingly, addition is sustained to the extent of Rs. 12,57,063 and the remaining addition deleted”.

5. Inspite of issuing notices, none appeared on behalf of assessee and we noticed that assessment before the AO was completed U/s. 144 and the appeal by the CIT(A) was also determined ex-parte. We have no information whether assessee has preferred any appeal on the incomes confirmed by the CIT(A), as no notices could be served by the Revenue so far. In these circumstances, without prejudice to the rights of assessee, if at all I.T.A. No. 1019/Hyd/2017 :- 4 -:

any appeal is preferred and pending, the present appeal is heard ex-parte-respondent.

6. After considering the submissions of the DR, we find no reason to interfere with the order of the Ld.CIT(A). There is no reason why the cash deposits should be assessed U/s. 68 when cheque deposits were accepted as business turnover. We find the reason given by the Ld.CIT(A) in treating the entire amount as turnover is reasonable on the facts of the case. Moreover, income is also estimated as assessee has not co-operated in the proceedings. Since assessee is involved in transport business and income was determined at 10% as against 6% of the AO, we have no option than to confirm the order of CIT(A) in the appeal of Revenue. However, it should be considered that this order should not come in the way of determining the total turnover and rate of income in the case, assessee has preferred any appeal which was not brought to our notice. Subject to these observations, appeal of Revenue is dismissed.

Order pronounced in the open court on 18th May, 2018

(D. MANMOHAN)                              (B. RAMAKOTAIAH)
VICE PRESIDENT                            ACCOUNTANT MEMBER
Tirupati, Dated 18th May, 2018
TNMM
                                                        I.T.A. No. 1019/Hyd/2017
                                 :- 5 -:



Copy to :

1. Income Tax Officer, Ward-4, Nellore.

2. Sri Shaik Zameer, Kovur (V) & (M), Nellore District.,

3. CIT(Appeals)-Tirupati.

4. Pr.CIT-Tirupati.

5. D.R. ITAT, Hyderabad.

6. Guard File.

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