Business Income not to be confirmed merely on the basis Closing Bank Balance: ITAT [Read Order]

The Income Tax Appellate Tribunal,(ITAT) ‘SMC’ Bench Chandigarh, has recently, in an appeal filed before it, held that business income is not to be confirmed merely on the basis of closing bank of the assesse.

The aforesaid observation was made by the Tribunal when an appeal was preferred before it by an assessee wherein the correctness of the order dated 11.02.2019 of CIT(A) Ludhiana, pertaining to 2010-11 assessment year was assailed.

The ground of the assesse appellant’s appeal being that the CIT(A) had wrongly confirmed the business Income at Rs 1082321 , simply on the basis of the closing bank balance as on 31-03-2010 ,in place of Business income of Rs 228800/- declared by appellant in ITR, the opposing submission of the Sr. DR was that in view of the fact that huge deposits were found to have been made by the assessee in his bank account, the AO is justified in making the addition and further that considering the fact that  very meager earnings have been shown by the assessee from the activity despite a deposit of huge amounts in his bank account, the  Commissioner is also fully justified to sustain the addition.

However, considering both the opposing contentions and perusing the materials available on record, Diva Singh, the Judicial member of the Tribunal observed:

“I have heard the submissions and perused the materials on record. In the facts of the present case, admittedly the assessee is shown to be a petty farmer having only 2 acres of agriculture land in the name of his wife which is hardly sufficient to maintain the family. It is also a fact that the assessee was approved by UHBVN Haryana Bijli Vitran Nigam for installation of pole mounting for release of Tubewell connections to farmers under 'Self Execution Scheme' of Uttar Haryana Bijli Vitran Nigam.”

“It is a matter of fact that the assessee has not been maintaining books of account. The amounts received for the installation of tube wells for farmers etc. has been consistently argued to be deposited and withdrawn from the specific bank account and the payments have been made for the said purpose.

There is nothing on record to show that the assessee who was admittedly a licencee of Uttar Haryana BijliVitaranNigal and entrusted with the task of installation of poles for tubewell connections had any other income except agricultural income. There is also nothing on record to show the educational qualification of the assessee or his capacity of maintaining accounts”, he added.

Thus, allowing the assessee’s appeal, he concluded: “Some one stray errant payment received after the completion of work by itself cannot be the occasion to discount the entire version of the assessee. Referring to my extreme disappointment on the above issues, I on a consideration of the entirety of facts, and circumstances of the case and the submissions of the Revenue direct that the addition sustained by the CIT(A) in the facts be deleted”.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates