Cash Deposits from Tractor Sales Can’t Be Taxed as Unexplained Income: ITAT Ahmedabad

ITO Vs Manibhadra Tractors (ITAT Ahmedabad)

In ITO vs Manibhadra Tractors, the Income Tax Appellate Tribunal, Ahmedabad Bench, examined whether cash deposits in the assessee’s bank account could be treated as unexplained income under Section 69A of the Income Tax Act.

The case arose from reassessment proceedings for A.Y. 2017–18 initiated under Section 147 after information was received that the assessee had carried out transactions amounting to Rs. 5.41 crore. As the assessee did not initially file a return or respond during assessment proceedings, the Assessing Officer (AO) completed the assessment ex-parte under Sections 147 read with 144B, making an addition of Rs. 4.08 crore as unexplained cash deposits.

On appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] partly allowed relief after considering additional evidence submitted by the assessee. The Revenue challenged this before the Tribunal, arguing that the assessee failed to discharge the burden of proof and that adequate evidence of tractor sales to farmers was not produced.

The assessee contended that it was a partnership firm engaged in the sale and service of tractors and spare parts, and that it had furnished extensive documentary evidence during appellate proceedings. These included tax audit reports, audited accounts, cash book, cash flow statements, bank statements, sales registers, purchase registers, VAT returns, RTO registrations of tractors sold, and ledger accounts of purchases from Mahindra & Mahindra.