The assessee has explained that Rs.92,54,462 is out of previous withdrawals and sale of garments and pleaded that it is to be excluded from the taxation. The assessee has not furnished any evidence to establish the nexus between the earlier withdrawals and deposits into various bank accounts. In such circumstances, we are not in agreement with the assessee’s counsel that it is from the earlier withdrawals. In our opinion, these receipts are to be considered as from unknown sources to bring into taxation. Therefore these deposits of Rs.92,54,462 to be considered as unexplained deposits from ‘income from other sources’. It is ordered accordingly.
Now the other contention of the assessee’s counsel is that the unexplained deposit into bank account cannot be considered as income u/s. 68 of the Act and it should be u/s. 69 / 69A of the Act. In our opinion, mentioning the wrong section is not fatal, we have to see only the substance not the form. Being so, inter alia, we confirm the addition on this count at Rs.92,54,462.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-10, Bangalore dt.24.01.2018 for the Asst. Year 2011-12.
2. The assessee has raised the following grounds :
3. The facts of the case are that the assessee has filed Return of Income for A.Y. 2011-12 on 29.07.2011 declaring an income of Rs.3,53,740. The Assessing Officer noticed that the assessee has made huge cash deposits in his bank account during the period under consideration total comes to Rs.;1,17,52,762. The Assessing Officer has asked the assessee to furnish the names and addresses of the persons from whom funds/cheques were received but no details were submitted. Several opportunities were given but the assessee failed to produce evidences to prove the genuineness of the claim of transactions. With regard to cash deposits, the assessee stated that they were mere redeposits of cash withdrawals made on various dates. However, the Assessing Officer noticed that cash deposits were made from various places of the country such as Raipur, Ernakulam, Calicut, Pune, Lucknow, Kolkata, Bellary, Ahmedabad, Jaipur, etc. Hence the Assessing Officer made an addition u/s. 68 of the Income Tax Act, 1961 (‘the Act’) to the extent of Rs.1,17,52,762. Aggrieved by the order of A.O., the assessee filed an appeal before the CIT (Appeals). The CIT (Appeals) observed that there is unexplained deposit into bank account of the assessee at Rs.93,67,962 though the assessee contended that it was a redeposit of earlier withdrawal from the bank account. On appeal, the CIT (Appeals) observed that the assessee has not able to explain the same with the earlier withdrawals. According to the CIT (Appeals), no reasonable person will do such kind of things and that too so often. The explanation given by the assessee that earlier withdrawals were redeposited to bank account is not supported by any evidence. It was also noted by the CIT (Appeals) that cash deposits are made in various place of the country such as Raipur, Ernakulam, Calicut, Pune, Lucknow, Kolkata, Bellary, Ahmedabad & Jaipur. Hence he rejected the ground taken by the assessee. Against this action of CIT (Appeals), the assessee is in appeal before us.
4. We have heard both the parties and perused the material on record. Similar issue was decided by the Tribunal, SMC Bench, Bangalore in the case of Shri Girish V Yalakkishettar Vs. ITO in ITA Nos.354/Bang/2019 Dt.27.01.2020 and the Tribunal observed that the assessee offered income to tax on presumptive basis u/s. 44AD of the Act and even after addition made by the Assessing Officer towards unexplained deposit in Bank Account is Rs.36,26,000 in the A.Y. 2013-14 and Rs.9,16,300 in the A.Y. 2014-15 to the disclosed turnover, the turnover of the assessee is less than Rs.1 Crore. As such, the Tribunal observed that income of the assessee to be assessed u/s. 44AD of the Act. The expenditure to the extent of 92% of gross receipts to be considered and income of the assessee to be estimated at 8% of the gross receipts and there is no applicability of Section 68 or 69A of the Act. For this purpose, the Tribunal relied on the judgement of Allahabad High Court in the case of Smt. Sarika Jain Vs. CIT 407 ITR 254 and also Hon’ble Bombay High Court in the case of CIT Vs. Bhaichand H GAndhi 141 ITR 67 (Bom). However in the present case, the assessee declared meager turnover as per Section 44AD of the Act at Rs.3,53,740 and disclosed profit at 55.26% of this turnover arrived at Rs.1,95,480 vide Ack. No.256979350290711 and source was explained on same day i.e. dt.29.07.2011 vide Acknowledgement No.257315590290711 wherein declared entire receipt of 100% of Rs.3,53,740 offered as income. Now if we added the unexplained deposit in Bank Account of the assessee at Rs.1,17,52,762, the total turnover will be at Rs.1,21,06,502 and the assessee will have go out of provision of Section 44AD of the Act since the turnover is more than Rs.1 Crore. As such, in our humble opinion, the ratio laid down by the judgement relied on by the ld. Counsel for the assessee in the case of Shri Girish V Yalakkishettar Vs. ITO (supra) and Sarka Jain Vs. CIT (supra) cannot be applied. Further there is no rule that when an amount is credited in the Bank Account, it must be taken as receipt from the business. Whether the amount of deposit added u/s. 68 or 69 is income from business or income from other sources depends on the evidence and explanation furnished by the assessee. If the deposits are found in the Bank account of the assessee and the explanation as to the nature and sources of the amount is rejected by the Assessing Officer, in such an occasion, the Assessing Officer is entitled to treat the deposit as ‘income from other sources’ and not as ‘business income’. It is merely because the assessee is running a business in which found certain unexplained deposit, it does not necessarily show that such deposits represented the suppressed business receipts and there would be no error of law in regarding unexplained deposits as income of the assessee from other sources. Unless there are strong reasons for connecting unexplained deposits with known source of income of the assessee, there will be no alternative to treating them as ‘income from other sources’.
5. Now in the present case, the assessee pleaded that unexplained deposit into Bank accounts is as follows :
|G. Loan from Madhu Sukumaran by Cheque||6,50,000|
5.1 We have carefully gone through the above details of deposit into bank accounts.
5.2 Regarding cheque deposit of Rs.;6,50,000/-, there cannot be any addition on this count, since there is confirmation letter given by Sri Madhu Sukumaran (PAN FVRPS 7461H). Regarding cash deposit being gift, the assessee filed confirmation letter from Chetan Sharma PAN BAAPS 9229N Dt.3.1.2018 stating that he has given a sum of Rs.2 lakhs by way of cash as a gift on 10.08.2010 to his son out of love and affection. Further there is a confirmation letter from Nidhi Sharma PAN AMIPS 5347J Dt.3.12018 a sum of Rs.2 lakhs gift by way of cash on 18.8.2010 to her son out of love and affection. In our opinion, the cash gift of Rs.4 lakhs from the assessee’s parents is to be accepted as source of deposit as explained, to that extent there cannot be any addition. Further the assessee explained that mutual advisory income, the assessee deposited Rs.4,77,346 into his bank account. However, the assessee offered income u/s. 44AD only to the extent of Rs.3,53,740. Hence the balance amount of Rs.1,23,603 not offered to tax. Being so, as per assessee’s income in revised return 100% of the turnover to be considered as income of the assessee. Accordingly, on this count, Rs.1,23,606 out of Rs.4,77,346 to be taxed separately. Regarding garment sale, the assessee submitted that there was a deposit of Rs.14,500 on this count. However, this was not offered to tax. The same to be included as income of the assessee.
The assessee explained that there is a S.B. interest from all these accounts to the tune of Rs.29,339, it is to be taxed as income from other sources subject to eligible deduction as per the Act.
6. The assessee has explained that Rs.92,54,462 is out of previous withdrawals and sale of garments and pleaded that it is to be excluded from the taxation. The assessee has not furnished any evidence to establish the nexus between the earlier withdrawals and deposits into various bank accounts. In such circumstances, we are not in agreement with the assessee’s counsel that it is from the earlier withdrawals. In our opinion, these receipts are to be considered as from unknown sources to bring into taxation. Therefore these deposits of Rs.92,54,462 to be considered as unexplained deposits from ‘income from other sources’. It is ordered accordingly.
7. Now the other contention of the assessee’s counsel is that the unexplained deposit into bank account cannot be considered as income u/s. 68 of the Act and it should be u/s. 69 / 69A of the Act. In our opinion, mentioning the wrong section is not fatal, we have to see only the substance not the form. Being so, inter alia, we confirm the addition on this count at Rs.92,54,462.
8. Levy of interest u/s. 234B of the Act is consequential in nature and mandatory.
9. In the result, the appeal of the assessee is partly allowed.
Pronounced in the open court on the date mentioned on the caption page.