2025 (5) TMI 1240 - AT - Income Tax

Unexplained cash deposits during demonetization - applying an adhoc rate of 8% of the total credit in the bank account - HELD THAT - Cash deposits were made out of cash withdrawals during the year. This may give a prima facie indication that the entire cash deposits remained explained by the Assessee. However CIT(A) categorically observes that the entire cash withdrawals and cash deposits made in the bank account represents business transactions of the Assessee. CIT(A) in the same paragraph concluded that the total credits in the bank account represent business transactions of the Assessee and resorted to estimate the profit element which was estimated at 8%. There is also the possibility of cash deposits being emanated out of cash sales which has been duly appreciated by the Ld. CIT(A) thereby to include even the cash deposits as part of the total credits while estimating the profit at 8%.Appeal of the Assessee is dismissed.

Summary

The Appellate Tribunal (ITAT Delhi) dismissed the Assessee's appeal against the CIT(A)/National Faceless Appeal Centre's order dated 19/02/2024 for AY 2017-18. The issue arose from substantial cash deposits during demonetization and non-filing of the Income Tax Return. The Assessing Officer made an addition of Rs. 4,30,54,670/- under section 69A of the Income Tax Act, 1961, via assessment order u/s 144. The CIT(A) reduced this addition to Rs. 34,44,374/- by applying an "adhoc rate of 8% of the total credit in the bank account," deleting the rest.The Assessee contended that cash deposits of Rs. 2,80,19,466/- were explained by cash withdrawals and that the 8% addition should apply only to Rs. 1,50,35,204/-, not the entire amount. The Department argued that no audited books were filed, and the 8% profit rate was rightly applied based on the nature of business transactions.The Tribunal upheld the CIT(A)'s reasoning, noting that the CIT(A) found the cash deposits and withdrawals represented business transactions and that the 8% profit estimate was appropriate, including the possibility of cash sales. The Tribunal stated there was "no infirmity in the order of the Ld. CIT(A)" and accordingly dismissed the appeal.