Lokendra Mali Vs ITO (ITAT Indore)
The ITAT, Indore Bench held that entire cash deposits in bank a/c cannot be treated as unexplained income, when the pattern of deposits & withdrawals shows linkage with small business activity. In this case, the assessee, a petty electrical contractor, had not filed return as income was below exemption limit, and the AO completed ex-parte reassessment u/s 144/147, taxing entire deposits of ₹10.27 lakh as unexplained.
The Tribunal noted that deposits were small/moderate amounts spread over the year, accompanied by frequent withdrawals with negligible running balance, clearly indicating gross business receipts rather than undisclosed income. It reiterated the settled law that only the income element embedded in gross receipts is taxable, not the entire deposits.
Balancing the plea for presumptive approach u/s 44AD and Revenue’s suggestion of higher margin, the Bench directed estimation of income @ 12% on gross receipts, deleting the addition of entire deposits. Appeal was partly allowed with consequential relief
FULL TEXT OF THE ORDER OF ITAT INDORE
Feeling aggrieved by appeal-order dated 22.05.2025 passed by learned Commissioner of Income-Tax (Appeals)-National Faceless Appeal Centre, Delhi [“CIT(A)”], which in turn arises out of assessment-order dated 19.12.2019 passed by learned ITO, 2(1), Ujjain [“AO”] u/s 144/147 of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2012-13, the assessee has filed this appeal on various grounds mentioned in Appeal-Memo (Form No. 36).
