Case Law Details
ITO Vs Rajiv Travels (ITAT Bangalore)
It is normal presumption that, if the deposits have been made from the cash balance available in the books of accounts, then the sources of the cash would stand explained and hence, there is no necessity to treat it as unexplained deposits warranting addition.
Facts-
The assessee is a transport contractor. The AO noticed that the assessee has deposited Rs.2,32,00,000/- in its bank account. Assessee explained that the deposits have been made out of collections made on running of buses and also out of cash withdrawn from the bank. The AO noticed that the aggregate amount of collections made by the assessee from April, 2013 to November, 2013 was 191.95 lakhs. The opening balance as on the beginning of the year stood only at Rs.1.69 lakhs. Hence both these amounts are lesser than the number of deposits, referred above. AO further noticed that the assessee was carrying huge cash balance at the end of each of the month. The AO also noticed that the assessee has withdrawn cash to the extent of Rs.8.93 Crores from the bank during the year under consideration, while the total amount of collections was Rs.4.88 Crores only. Hence the AO took the view that the assessee has withdrawn excess amount for using it for non-business purposes. Further, the assessee has also incurred expenses to the tune of Rs.4.66 Crores. The AO also noticed that the withdrawals have made from the bank by the person named Mr. Imran Basha and the assessee has not explained its business connection with the above said person.
Hence, the AO took the view that the explanations given by the assessee are contradictory. Accordingly, he took the view that the deposits of Rs.2.32 Crores stand unexplained. Accordingly, he assessed the same as income of the assessee.
In the appellate proceedings, the learned CIT(A) directed the AO to estimate income from deposits @ 10% and delete the balance amount of addition. Aggrieved, assessee filed an appeal before the tribunal.
Conclusion-
Held that both the tax authorities have not examined the books of accounts of the assessee in order to verify the contentions that the impugned bank deposits have been made out of balance available in the books of accounts. We, noticed that the AO has made abstract analysis of certain transactions and thus, disbelieved the explanations of the assessee without examining the books of accounts. The Ld CIT(A), however, proceeded to close the issue by estimating some income from the deposits.
It is normal presumption that, if the deposits have been made from the cash balance available in the books of accounts, then the sources of the cash would stand explained and hence, there is no necessity to treat it as unexplained deposits warranting addition. However, if the books of accounts have been manipulated to bring the cash balance in books, then it is the duty of the AO to locate such manipulations and take a view thereon in accordance with law. Therefore, ITAT set aside the order passed by the learned CIT(A) and restore all the issues to the file of the AO for examining it afresh.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
ITA No. 2639/Bang/2018 an appeal filed by the Revenue and the C.O. 02/Bang/2019 filed by the assessee are directed against the order dated 16.07.2018 passed by the CIT(A), Gulbarga, and they relate to Assessment Year 2014-15. The Revenue is aggrieved by the decision of the learned CIT(A) in partially deleting the addition made by the AO by estimating the income. The assessee is aggrieved by the decision of the learned CIT(A) in sustaining addition partially by estimating the income.
2. The facts relating to the above said issue are stated in brief. The assessee is a transport contractor. The AO noticed that the assessee has deposited Rs.2,32,00,000/- in its bank account as detailed below:
30.11.2013 Rs.57 lakhs
01.12.2013 Rs.55 lakhs
04.12.2013 Rs.75 lakhs
07.12.2013 Rs.45 lakhs
3. The assessee explained that the above said deposits have been made out of collections made on running of buses and also out of cash withdrawn from the bank. The AO noticed that the aggregate amount of collections made by the assessee from April, 2013 to November, 2013 was 191.95 lakhs. The opening balance as on the beginning of the year stood only at Rs.1.69 lakhs. Hence both these amounts are lesser than the number of deposits, referred above. The AO further noticed that the assessee was carrying huge cash balance at the end of each of the month. The AO also noticed that the assessee has withdrawn cash to the extent of Rs.8.93 Crores from the bank during the year under consideration, while the total amount of collections was Rs.4.88 Crores only. Hence the AO took the view that the assessee has withdrawn excess amount for using it for non-business purposes. Further, the assessee has also incurred expenses to the tune of Rs.4.66 Crores. The AO also noticed that the withdrawals have made from the bank by the person named Mr. Imran Basha and the assessee has not explained its business connection with the above said person. Hence, the AO took the view that the explanations given by the assessee are contradictory. Accordingly, he took the view that the deposits of Rs.2.32 Crores stand unexplained. Accordingly, he assessed the same as income of the assessee.
4. In the appellate proceedings, the learned CIT(A) directed the AO to estimate income from deposits @ 10% and delete the balance amount of addition. In this regard, he placed his reliance on the decision rendered by the ITAT, Hyderabad Bench, order dated 18.05.2018, in the case of ITO Vs. Shaikh Jameer. Both the parties are aggrieved by the decision rendered by the learned CIT(A).
5. We heard the parties and perused the record. We notice that the AO has made an abstract analysis of collections made from running of buses, opening balance, etc. It is the submission of the learned AR that all collections and deposits made into the bank account have been duly reflected in the books of accounts. He further submitted that Mr. Imran Basha was the employee of the assessee and he has withdrawn the money form the bank account on behalf of the assessee. Accordingly, he submitted that the sources of deposits are available within the book balances only. The learned AR also submitted that all the transactions of transport business, withdrawals and deposits from/with the banks etc., have been duly recorded in the books of accounts. Accordingly, the learned AR contended that there was no necessity to make addition for the deposits, when the sources are available within the books. He also contended that the Ld CIT(A) was also not justified in estimating income from these deposits.
6. On the contrary, learned DR supported the order passed by the AO. He submitted that the learned CIT(A) was not justified in estimating income from bank deposits when the AO has given proper reasons for assessing the said deposits.
7. Having heard the rival submissions, we notice that both the tax authorities have not examined the books of accounts of the assessee in order to verify the contentions that the impugned bank deposits have been made out of balance available in the books of accounts. We have noticed that the AO has made abstract analysis of certain transactions and thus, disbelieved the explanations of the assessee without examining the books of accounts. The Ld CIT(A), however, proceeded to close the issue by estimating some income from the deposits.
8. It is normal presumption that, if the deposits have been made from the cash balance available in the books of accounts, then the sources of the cash would stand explained and hence, there is no necessity to treat it as unexplained deposits warranting addition. However, if the books of accounts have been manipulated to bring the cash balance in books, then it is the duty of the AO to locate such manipulations and take a view thereon in accordance with law. However, as noticed earlier, both the tax authorities have not examined the books of accounts. Accordingly, we are of the view that the issue requires fresh examination at the end of AO, who is required to verify the explanations of the assessee by duly examining the books of accounts. Accordingly, we set aside the order passed by the learned CIT(A) and restore all the issues to the file of the AO for examining it afresh. After affording adequate opportunity of being heard to the assessee, the AO may take appropriate decision in accordance with law. We also direct the assessee to produce the books of accounts before the AO and also furnish all the information and explanations that may be called for by the AO.
In the result, appeal filed by the Revenue and the C.O. filed by the assessee are treated as allowed for statistical purposes.
Pronounced in the open court on the date mentioned on the caption page.
Author Bio
