2020 (11) TMI 558 - AT - Income Tax

Undisclosed cash deposited in the bank account - HELD THAT - Cash deposited in the bank account of the assessee can be safe presumed to be from the sale proceeds of the firm. Revenue has also shown laxity by not obtaining the statement from the UTI bank with respect to the transactions made by the assessee. In this situation it will not be fair to treat the entire cash deposits as the unaccounted income of the assessee as it can be reasonably construed to represent as the undisclosed turnover of the firm in which the assessee is a partner. Addition of 17% on the undisclosed turnover of the firm of Rs. 12, 83, 408/- can be treated as the unaccounted income earned by the assessee to meet the end of justice. Hereby sustain the addition as the unaccounted income of the assessee.

Summary

Issues:
Delay in filing appeal before the Tribunal, Addition of unexplained cash deposits in bank account, Lack of proper books of accounts and evidence, Source of bank deposits, Treatment of cash deposits as unaccounted income, Consideration of lockdown due to Covid-19 pandemic.

Delay in filing appeal before the Tribunal:
The appeal was filed with a delay of 544 days, and the assessee sought condonation of delay due to misplacement of the order by an employee of the Chartered Accountant. The Tribunal, after perusing the explanation and affidavit provided, found the reasons for delay reasonable and not attributable to the assessee. Consequently, the Tribunal condoned the delay in the filing of the appeal in the interest of justice.

Addition of unexplained cash deposits in bank account:
The assessee, a resident individual running a wine shop, deposited a significant amount in the bank account, which was not disclosed in the income tax return. The assessing officer (AO) treated this amount as unexplained credit, leading to an addition of the same in the assessment. The CIT (A) upheld this decision due to the lack of proper books of accounts and evidence provided by the assessee to prove the source of the bank deposits. The Tribunal noted that neither the assessee nor the firm maintained proper books of accounts, and the bank account was not reconciled with the business operations. Despite the lack of concrete evidence, the Tribunal presumed the cash deposits to be from the firm's sale proceeds but sustained an addition as unaccounted income to meet the ends of justice.

Treatment of cash deposits as unaccounted income:
While acknowledging the lack of substantial evidence, the Tribunal considered the cash deposits as representing the undisclosed turnover of the firm. It noted the Revenue's failure to obtain statements from the bank regarding the transactions, indicating laxity. The Tribunal decided to treat a portion of the cash deposits as unaccounted income earned by the assessee, sustaining an addition of &8377; 2,18,000 as unaccounted income, rather than the entire amount.

Consideration of lockdown due to Covid-19 pandemic:
The Tribunal mentioned the delay in pronouncing the order, attributing it to the extraordinary situation of the lockdown during the Covid-19 pandemic. The Tribunal justified the delay by referring to a decision of the Mumbai Bench of the Tribunal and pronounced the order after 90 days of hearing. The appeal was partly allowed, considering the circumstances and evidence presented during the proceedings.