Gangaiah Nagaraju Vs ITO (ITAT Bangalore)
Conclusion: Addition against unexplained cash deposit of ₹49.50 lakh was remanded back to AO for verification if the deposits were from business activities, the addition under Section 69A could not stand.
Held: Assessee, was found to have made a cash deposit of Rs.49,45,800 and received contract income of Rs.3,03,315, with tax deducted at source. A notice under section 148 was issued on 29.3.2019 due to the assessee’s failure to file a return. After issuing a notice undersection 133(6) to Indian Overseas and Corporation Banks, assessee explained that the cash deposit was borrowed from friends for house construction. However, assessee could not justify the source of the deposit. AO rejected the explanation, disallowed the peak credit request, and added Rs.49,45,800 under section 69A and Rs.3,03,325 for contract receipts from Form 26AS, determining total taxable income of Rs.52,49,115 in the reassessment order passed. Assessee appealed to CIT(A), stating he was in the waste paper recycling business with a turnover of Rs.72,04,820, and that the cash deposit was from business income. He argued that the contract income of Rs.3,03,325 should be taxed at an estimated profit of 8% instead of 100%. Assessee also clarified that the actual cash deposit was Rs.47,81,800, challenging the AO’s addition. CIT(A) found assessee’s claim inconsistent, noting no return was filed and no evidence was provided for the business. As a result, the CIT(A) confirmed the addition of Rs.49,45,800 and did not address the contract income issue. On appeal. It was held that since the lower authorities doubted the business claim due to inconsistent statements and non-filing of returns, Tribunal held that if the deposits were from business activities, the addition under Section 69A could not stand. To verify this, the matter was restored to AO for examination. If satisfied, the officer was directed to compute the taxable income accordingly.
