Ramasamy Sathish Vs ITO (ITAT Chennai)
Entire Bank Deposits Cannot Be Treated as Income – ITAT Directs 8% Profit Estimation
The assessee, engaged in textile trading and money-lending, filed return for AY 2016-17 declaring presumptive income u/s 44AD of ₹3.19 lakh. The case was selected for scrutiny due to large cash deposits of ₹2.89 crore in bank accounts. The assessee explained that the deposits represented textile business receipts, loan recoveries with interest, and redeposit of earlier cash withdrawals.
The AO examined the bank transactions and, after granting credit for certain withdrawals and repayments, treated ₹1,25,17,803 as unexplained investment u/s 69, which was confirmed by the CIT(A).
Before the ITAT, the assessee produced bank statements, cash book for the entire year, and ledger accounts, and contended that the deposits were recorded in books and related to business transactions. Alternatively, the assessee argued that income should be estimated under the presumptive scheme rather than taxing the entire deposits.
The Tribunal observed that:
- The business activity of textile trading and money-lending was not disputed by the AO.
- The cash deposits were recorded in the cash book, and the AO had not rejected the books u/s 145(3).
- Section 69 applies only to investments not recorded in books, which was not the case here.
- Even otherwise, entire bank deposits cannot be taxed as income, since that would amount to taxing turnover rather than profit.
However, since the assessee did not produce complete independent evidence for all transactions, the Tribunal held that reasonable estimation of income was appropriate.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
The present appeal is filed by the assessee against the order dated 13.08.2025 passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as “ld.CIT(A)”), dismissing the appeal filed by the assessee against the assessment order dated 29.12.2018 passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as the “Act”), pertaining to Assessment Year (A.Y.) 2016-17.
