Mohd. Saleem Rather Vs ITO (ITAT Amritsar)
The ITAT, Amritsar Bench held that once business activity is accepted, bank deposits cannot be artificially bifurcated into business credits & unexplained cash, merely because part of deposits were made during demonetisation period.
In this case, the assessee, a wholesale trader of mobile phones, had total bank credits of about ₹200.85 lakh, including ₹13.96 lakh cash deposits during demonetisation. While the AO estimated income @ 8% on non-cash credits, he separately treated demonetisation cash deposits as unexplained, which was affirmed by CIT(A).
The Tribunal noted that the AO himself accepted that the assessee was carrying on business, and there was no evidence of any other source of income. Once business receipts are accepted, entire bank credits must be treated uniformly as business receipts, and selective isolation of demonetisation cash is unjustified.
Considering that mobile phone wholesale is a thin-margin trade, the Bench held 8% to be excessive and directed estimation of business income @ 4% on total bank credits (including demonetisation deposits). Accordingly, the appeal was partly allowed and additions as unexplained deposits were set aside.
FULL TEXT OF THE ORDER OF ITAT AMRITSAR
1. Aforesaid appeal by assessee for Assessment Year (AY) 201718 arises out of an order of learned Commissioner of Income Tax (Appeals), NFAC dated 24-12-2024 in the matter of an assessment framed by Ld. AO on best judgment basis u/s 144 on 29-12-2019. Having heard rival submissions, the appeal is disposed-off as under.
