Case Law Details
Smt. Kopparum Laxminarayan Kumuda Vs ITO (ITAT Bangalore)
The case of Smt. Kopparum Laxminarayan Kumuda vs ITO, adjudicated by the Income Tax Appellate Tribunal (ITAT) Bangalore, revolves around the taxation of cash deposits arising from a store business. The appellant contested the CIT(A)’s order under section 250 of the Income Tax Act, 1961, for the Assessment Year 2017-18.
The appellant, an individual, failed to file income tax returns for the mentioned assessment year. Subsequently, the Assessing Officer (AO) completed an assessment under section 144 of the Act, attributing unexplained cash deposits and estimating business income. The appellant appealed to the First Appellate Authority (FAA), which dismissed the appeal due to non-response to notices.
During the Tribunal proceedings, the appellant’s representative argued that the cash deposits stemmed from a provision store operated by the appellant’s deceased husband. The appellant, being illiterate and unaware of the business operations, couldn’t respond to notices. The appellant pleaded for taxation of cash deposits at 8%, akin to small business presumptive rates.
Considering the evidence presented, including medical records and the death certificate of the appellant’s husband, the Tribunal inferred that the cash deposits likely originated from the business. It deemed taxation at 8% appropriate, aligning with presumptive rates for small businesses. The Tribunal upheld the estimation of business income by the AO.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This appeal at the instance of the assessee is directed against CIT(A)’s order dated 31.07.2023, passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2017-18.
2. The grounds raised read as follows:
The order of the Assessing Authority and that of the Learned Commissioner of Income Tax (Appeals) are against the facts of the case.
The Learned Assessing Authority has invoked Section 144 without providing a reasonable opportunity of hearing.
The estimation of Business Income is inappropriate. Holding the entire deposit of cash as an Unexplained Investment does not stand the test of Law besides being highly hypothetical and farfetched.
The order of the First Appellate Authority without serving a notice of hearing before completing the Ex parte order is bad in law.
For the aforesaid reasons the Appellant prefers this appeal with a request to consider such other grounds that may be urged from time to time
3. Brief facts of the case are as follows:
Assessee is an individual. For the Assessment Year 2017-18, no return of income was filed by the assessee. It was noticed that assessee had deposited cash aggregating to Rs.12,17,200/- into her bank account during the demonetization period. Assessee was issued notice under section 142(1) of the Act. Since assessee had not filed her explanation on the source of cash deposit into her bank account, assessment was completed under section 144 of the Act vide order dated 25.09.2019 by assessing the total income at Rs.17,84,740/-. The addition was made on account of unexplained cash deposit of Rs.12,17,200/- and estimated the business income of Rs.5,67,265/-.
4. Aggrieved by the assessment completed under section 144 of the Act, assessee filed appeal before the First Appellate Authority (FAA). The CIT(A) passed an ex-parte order dismissing the appeal of the assessee in limine without adjudicating the issue on merits. The reason for the CIT(A) to dismiss the appeal of the assessee in limine was that notices issued from the Office of the CIT(A) was not responded to by the assessee.
5. Aggrieved, assessee has filed the present appeal before the Tribunal. The learned AR submitted that assessee’s husband was running a small provision store in the name of the assessee. It was submitted that assessee’s husband fell sick during the relevant Financial Year and was periodically admitted to hospital and he finally succumbed to his illness on 07.04.2018. It was stated that assessee is illiterate and was not aware of the business run by her husband in her name. Hence, assessee could not respond to the notices issued from the Office of the AO as well as CIT(A). The limited prayer of the learned AR before the Tribunal is to consider the cash deposit as coming out of the business of the assessee and may be taxed @ 8%. It was submitted by the learned AR that the estimation of business income by the AO at Rs.5,67,265/- clearly indicate that assessee was running the business and the cash deposits are nothing but out of the business run by her husband in her name.
6. The learned Standing Counsel supported the orders of the AO and the CIT(A).
7. I have heard the rival submissions and perused the material on record. The learned AR placed on record the medical treatment of the assessee’s husband from beginning of year 2018 and also produced the death certificate. The assessee’s husband had expired on 07.04.2018. The assessee’s business was run by her husband and assessee was not in the knowing of things. Therefore, in all probability, the cash deposit of Rs.12,17,200/- into assessee’s bank account during the demonetization period is out of the business conducted in her name. Since assessee was not attending to day-to-day activities of the business which was run in her name by her husband, no useful purpose will be served in restoring the matter to the AO for denova consideration as her husband has expired on 07.04.2018. On the facts of the instant case, I am of the view that taxing cash deposit as coming out of business receipt would meet the ends of justice. Therefore, I hold that assessee would be liable to be taxed @ 8% on cash deposited aggregating to Rs.12,17,200/- since the presumptive rate of tax for small business is at 8%. No contention was raised with regard to the addition made on estimation of business income of Rs.5,67,265/-, hence the ground relating to the same is rejected.
8. In the result, appeal filed by the assessee is partly allowed.
Pronounced in the open court on the date mentioned on the caption page.
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