Bajrangbali Tufanbhai Das Main Bazar Vs ITO (ITAT Surat)
Conclusion: Assessee had made multiple deposits and multiple withdrawals in the SB account of assessee amounting to total deposit of Rs.13,20,535/- whereas total withdrawal of Rs.13,19,392/-, therefore, in absence of any evidence, it couldn’t be ascertained whether the amounts withdrawn were used for purchase of vegetables or were used for personal expenses or investments. Hence, a reasonable estimate of cash deposit @25% might be considered as income of the assessee.
Held: Assessee was a wholesale vegetable trader, was scrutinised by the Income Tax Department after failing to file his original income tax returns for the AY 2011-12. Upon reassessment, it was found that he had deposited ₹13 Lakhs in an undisclosed savings bank account. AO also identified total credit entries of ₹89.6 Lakhs in his disclosed current account and sought to estimate profit at 35% of this turnover. In the 2013-14 AY, a similar issue arose with cash deposits and total income turnover under examination. Due to non-compliance, AO added 100% of the cash deposit of ₹13 Lakhs as unexplained income.AO also estimated profit at 35% of the turnover of ₹89 Lakhs, assuming unreported income, and initiated penalty proceedings under Section 271B for failing to get accounts audited under Section 44AB. Aggrieved by the order passed by AO, assessee moved on with an appeal to CIT(A), where assessee challenged the reopening of the assessment, arguing that Section 148 was not justified. CIT(A) upheld the reopening, stating that the then-on-disclosure of the savings account justified the reassessment. CIT(A) reduced the estimated profit rate from 35% to 8%, matching it with the presumptive taxation scheme under Section 44D. CIT(A) confirmed the complete addition of cash deposits as unexplained income since the assessee failed to provide sufficient proof regarding the source of the revenue. Dissatisfied with CIT(A) order, assessee moved the ITAT, where Tribunal upheld the reopening of the assessment under Section 147, citing a reason to believe the basis for undisclosed income. It was held that no evidence had been given by assessee that it was buying directly from the farmers and after transporting the vegetable in small units and pooling from various places, he dispatched the vegetable in bulk to various places. Therefore, the decision of ITAT Hyderabad Benches was not applicable. From the bank statement of the undisclosed SB account, it was found that there were multiple deposits and withdrawals in the SB account of assessee. There was total deposit of Rs.13,20,535/- whereas total withdrawal of Rs.13,19,392/-. Most of the deposits were in small amounts and withdrawals were also very small amounts. There was nothing on record to suggest that assessee was carrying on any business other than the business of wholesale purchase and sale of vegetables. Therefore, the logical conclusion would be that either he was carrying out the same business a part of which was not disclosed to the Department. It was also possible that part of the profit of his disclosed business was diverted and the amounts were deposited in the SB account. However, it was seen that assessee had also made multiple withdrawals of almost the same amounts during the year. In absence of any evidence, it could not be ascertained whether the amounts withdrawn were used for purchase of vegetables or were used for personal expenses or investments. Hence, a reasonable estimate of cash deposit might be considered as income of the assessee. It would be fair and reasonable if 25% of the cash deposit of Rs.13,20,535/- was taken as the income of assessee. AO was therefore, directed to add Rs.,3,30,134/- and delete the remaining amount.
