Babubhai Ramanbhai Patel Vs ITO (ITAT Ahmedabad)
Cash Deposits Matching Kirana Shop Sales Can’t Be Taxed u/s 69; Section 44AD Claim & Business Pattern Accepted — Entire Addition of Rs. 20.23 Lakhs Deleted
In this appeal, Babubhai Ramanbhai Patel, a small kirana shopkeeper from Randheja, challenged the addition of Rs. 20,23,800/- made u/s 69 treating his cash deposits as unexplained investment. The Assessee had not filed a return originally & did not respond to notices u/s 148, 142(1) & 133(6). The AO obtained bank statements from SBI & since no explanation was furnished, he treated the deposits as unexplained u/s 69.
Before the CIT(A), the Assessee submitted trading account, P&L account, balance sheet, cash book, sales register & bank statement, contending that he operated a small kirana shop & deposits represented daily cash sales. Additional evidence was filed under Rule 46A citing shifting of residence & health issues. The AO objected to admission of additional evidence & complained that the Assessee did not furnish VAT returns, purchase bills, rent agreement, electricity bills or municipal permissions. The CIT(A) held that the Assessee failed to prove business existence for FY 2011-12 & rejected the applicability of section 44AD, concluding that the deposits remained unexplained.
Before the Tribunal, the Assessee established that total sales for the year were around Rs. 22 lakhs & the cash deposits of Rs. 20.23 lakhs closely matched the sales recorded. The bank statement clearly showed a business pattern — frequent deposits corresponding with daily sales & regular withdrawals which the Assessee stated were used to purchase kirana stock. The Tribunal observed that the Department had not produced any material to show the deposits were from undisclosed sources. Even the remand report did not record any finding that the Assessee was NOT running a kirana shop during the year or that the books were fabricated. Instead, the AO objected only on technical requirements like VAT returns & purchase bills, which the Tribunal held were not decisive in the case of a small rural kirana trader claiming presumptive taxation under section 44AD.
The Tribunal held that when the sales register, cash book & bank deposits correlate, withdrawals match business needs, & no contrary evidence exists, treating cash deposits as unexplained is unsustainable. The explanation was plausible, supported by contemporaneous records & uncontroverted by the Department. Therefore, applying settled principles, the Tribunal deleted the entire addition of Rs. 20,23,800/- made u/s 69.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide order dated 11.07.2024 passed for A.Y. 2012-13.
