Deposit and withdrawal of cash in regular interval is enough to prove that assessee is engage in business

IN THE INCOME TAX APPELLATE TRIBUNAL

(DELHI BENCH ‘G’: NEW DELHI)

SHRI I.C. SUDHIR, JUDICIAL MEMBER

and

BEFORE SHRI B.C. MEENA, ACCOUNTANT MEMBER

ITA No.522/Del./2012

(ASSESSMENT YEAR: 2008-09)

Ito, Ward 47 (2),

New Delhi.

(APPELLANT)

Vs.

Ms. Surinder Kaur,

B – 56, Kripal Apartments,

Plot No.44, I.P. Extension,

New Delhi – 110 092.

(PAN: AMFPK0860K)

 (RESPONDENT)

ASSESSEE BY: Shri R.S. Singhvi, Advocate

REVENUE by: Smt. Jyoti Legha, Senior DR

ORDER

PER B.C. MEENA, ACCOUNTANT MEMBER:

This appeal filed by the revenue emanates from the order of CIT (Appeals)-XXX, New Delhi dated 28.11.2011.

2. The assessee is an individual. The order u/s 143(3) was passed on 21.12.2010 in which an addition of Rs.11,03,621/- was made u/s 68 of the Income-tax Act, 1961. The CIT (A) deleted the addition partly by holding as under :-

“3. I have considered the submission of the appellant and gone through the balance sheet, trading and profit loss account and cash flow statement. The Assessing Officer has considered the business income to the extent of Rs.5,990/- on the basis of trading and profit & loss account and as such it is not fair to disregard the same trading and profit & loss account in the context of corresponding deposit in the bank account. It was noticed that all the transactions in the bank account are in cash and as such there is merit in the submission of the assessee that cash deposit are supported and covered by cash sales.

Further, there are corresponding withdrawals which is claimed to be on account of purchases and this fact also support the claim of business activities. In the light of above position, the Assessing Officer is not correct in disregarding in the cash entries in the bank account with reference to business activities particularly when the Assessing Officer has considered profit as per same profit and loss account for the purpose of assessment. Even otherwise, the entries in the bank account have to be considered in totality and it is not open to disregard withdrawals and making addition in respect of all the credit entries on cumulative basis. As per peak credit details given in the written submission duly supported by cash flow statement, peak credit works out to Rs.56,000/- only.

I have gone through the trading and profit & loss account and it is noticed that in respect of sale of Rs.9,15,000/-, assessee has only declared profit to the extent of Rs.5,990/- which is not in confirmity with provisions of sec. 44AF. As entire purchase and sale is in cash and not verifiable, it is appropriate to apply provisions of sec. 44AF as per which business profit will work out to Rs.45,750/- @ 5% on sales of Rs.9,15,000/-. However, as per cash flow statement, peak credit works out to Rs.56,000/- and accordingly it would be reasonable to sustain addition to the extent of Rs.56,000/-. In view of above discussion, the Assessing Officer is directed to restrict the addition to the extent of Rs.56,000/- as against addition of Rs.11,03,621/-.The balance amount is deleted.”

3. Now the revenue is in appeal before us by taking the following grounds:-

"On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in:-

1. Reducing the addition of Rs.11,03,621/- to Rs.56000/- rightly made by the AO on account of unexplained cash credit in the bank account of the assessee without appreciating the fact that the assessee failed to produce documentary evidence in support of her claim for cash deposits.

2. Not considering the fact that the assessee has filed return in ITR-2 meant for individuals and HUF's not having income from business and profession.

Therefore the claim of the assessee that she has doing business from home in cash appears to be an afterthought. The appellant craves the right to alter, amend, add or substitute the grounds of appeal.”

4. We have heard both the sides. After hearing both the sides, we find that assessee was depositing cash in bank account on regular intervals. Cash was also withdrawn on regular intervals. This trend shows that the assessee was engaged in the business. The total sales turnover declared for the year was Rs.9,15,000/- against the purchases of Rs.8,45,000/-. In the profit & loss account and balance sheet, the assessee has declared the net profit of Rs.5,990/- after claiming certain expenses. The pattern of deposits available at page 4 of the paper book shows that the cash has been deposited and it has been withdrawn on 41 occasions and on 46 occasions respectively during the period 01.04.2007 to 31.03.2008. The peak credit in the account was Rs.56,000/- only. Even if it is looked from the maximum investment angle then also addition should not exceed the amount of peak credit. The assessee was also earning income from salaries, therefore, the return filed in ITR – 2 shall not go against the assessee. Considering the totality of the facts and circumstances, we find that CIT (A) was justified in restricting the addition to Rs.56,000/- only. Therefore, we find no fault in the order of the CIT (A) and we sustain the same.

5. In the result, the appeal of the revenue stands dismissed.

Order pronounced in open court on this 3rd day of May, 2013.

Sd/- Sd/-

(I.C. SUDHIR) (B.C. MEENA)

JUDICIAL MEMBER ACCOUNTANT MEMBER

Dated the 3rd day of May, 2013

TS

Copy forwarded to:

1. Appellant

2. Respondent

3. CIT

4. CIT(A)-XXX, New Delhi.

5. CIT(ITAT), New Delhi.

AR, ITAT

NEW DELHI.