Bank Deposits need not be Separately Assessed, When Income was Estimated more than What Assessee has Disclosed: ITAT [Read Order]

The Hyderabad bench of Income Tax Appellate Tribunal (ITAT) in Manne Baswa Reddy v.Income Tax Officer held that Bank Deposits need not be separately assessed when the estimated income is more than the income disclosed by the assessee.

The assessee is an individual whose income is derived from retail trading in IMFL, under the trade name of  M/s. Sri Durga Wines. Assessee’s books of account were rejected and income was estimated at 5% on the liquor put to sale. Besides the Assessing Officer (AO) found that Assessee maintained a bank account with Andhra Bank and during the period from 01-04- 2011 to 31-03-2012, Rs. 1,60,000/- was found to be deposited by the assessee. The AO was of the opinion that the said bank account does not appear to be used for IMFL business and assessee was asked to explain the sources for cash deposits made. As there was no reply, the amount was treated as ‘unexplained cash deposit’. Accordingly, the amount was added to his income under section 68 of the Income Tax Act 1961.

The aggrieved assessee filed appeal before the CIT(A).The CIT(A) determined the net profit of the assessee at 4.5% of the total cost of goods sold as reasonable profit. It also confirmed the addition of 1,60,000. Aggrieved by the order the assessee preferred an appeal before the ITAT.

The ITAT directed the AO to fix the reasonable profit at 3% of the cost of goods sold. It relied upon the decision in ‘Shri Sridhar Ramagiri Vs. ITO’ in which the co-ordinate bench of ITAT held that in the majority of cases related to liquor the total income have been assessed at 3 to 5% of the goods put to sale and it has been upheld by the High Court of Andhra Pradesh.

In the issue of addition of Rs 1,60,000 the ITAT observed that, irrespective of whether the aforesaid bank account is used for the business or not the account pertains to the Assessee. Therefore, the deposits in the bank account were made out of income from the business.

Thus the ITAT held that the deposits in the bank account need not be separately assessed when the assessed income is more than the income disclosed by the assessee.