Receipts that constitute business receipts cannot be held as unaccounted money of the assessee: ITAT directs re-computation [Read Order]

The Chennai bench of the Income Tax Appellate Tribunal (ITAT) held that receipts constitute business receipts and nothing else and therefore, the same could not be held to be unaccounted money of the assessee.

During assessment proceedings, it transpired that the assessee made cash deposits in her bank account during the period between 10- 11-2016 to 30-12-2016. The assessee did not file return of income in earlier years. The  AO proceeded to frame the assessment on best judgment basis u/s 144 since no books were maintained by the assessee. The assessee failed to respond to hearing notices.

The  AO analyzed the pattern of cash deposit which revealed that there was sudden spike in cash deposit during demonetization period. The total cash deposited was Rs.224.34 Lacs out of which an amount of Rs.41.62 Lacs was deposited in Specified Bank Notes (SBN). The assessee, in reply to proceedings u/s 131(1), submitted that during demonetization period, the clients approached with demonetized currency to book tour packages. Such cash was deposited in the bank account. In most cases, the clients opted for travelling at later dates. However,  AO held that old bank notes ceased to be legal tender from midnight of 08-11-2016 and such currencies lost value in money terms and thus could not be used in a transaction. Therefore, the currency deposited in SBN was held to be unaccounted money of the assessee

The other deposits in the bank account were Rs.182.71 Lacs on which  AO estimated profits of 5% which worked out to Rs.9.13 Lacs. The deposits of Rs.41.62 Lacs in SBN were treated as unexplained money. The  CIT(A) confirmed the action of  AO since no new material could be placed by the assessee during appellate proceedings. Aggrieved, the assessee appealed before the tribuinal.

After hearing both the parties, the tribunal noted that the assessee is engaged in ticketing business under proprietorship concern namely M/s Juzgo Holidays. There is no other source of income for the assessee. The assessee has made cash deposits of Rs.224.34 Lacs out of which an amount of Rs.41.62 Lacs was deposited in Specified Bank Notes (SBN). The  AO has estimated income of 5% on normal deposits whereas SBN has been considered to be the unexplained money u/s 69A despite the fact that the only source of income for the assessee is ticketing business only. The assessee had submitted that during demonetization period, the clients approached with demonetized currency to book tour packages. Such cash was deposited in the bank account.

The two member bench consisting of V. Durga Rao (Judicial member) and Manoj Kumar Aggarwal (Accountant member) held that In most cases, the clients opted for travelling at later dates. Thus, such receipts constitute business receipts and nothing else and therefore, the same could not be held to be unaccounted money of the assessee. Under such circumstances, making full addition thereof could not be held to be justified.

Considering the fact that  AO has estimated income of 5% on other deposits, the same estimation could be made against demonetized currency of Rs.41.62 Lacs. We order so. The  AO is directed to re-compute the income of the assessee by accepting 5% of demonetized currency as the income of the assessee. Thus the appeal was allowed.

To Read the full text of the Order CLICK HERE

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