ITAT Orders Fresh Probe into ₹3.17 Crore Cash Deposits in Egg Trade [Read Order]

Thebench of the Income Tax Appellate Tribunal, Mumbai , has set aside an appeal involving unexplained cash deposits and remanded the matter back to the Assessing Officer for fresh adjudication. The dispute pertained to additions under the Income Tax Act, 1961 arising from cash deposits linked to the assessee’s egg trading business.

The case involved Zaiullabddin Gousaheb Kochargi, who had filed his return of income for the Assessment Year (AY) 2017-18 declaring ₹2.30 lakh During scrutiny assessment, the Assessing Officer (AO) found cash deposits of ₹3.17 crore in Kochargi’s bank account with Hindustan Co-operative Bank, Vikhroli Branch. The Assessing Officer noted a sharp increase in sales from ₹60.54 lakh in the preceding year to ₹4.60 crore in the relevant year and held that Kochargi failed to establish the genuineness of such sales or provide details of customers.

Notices under Section 133(6) of the Income Tax Act, 1961, issued to his suppliers, Karuna Egg Centre and Mohd. Naseeruddin, either returned unserved or went unanswered. Consequently, the AO treated the deposits as unexplained cash and made additions of ₹3.17 crore along with ₹4.45 lakh towards expenses.

Represented by Ganesh Shetty, the Appellant contended before the Commissioner of Income Tax (Appeals) [CIT(A)] that the deposits arose from wholesale egg trading, supported by ledger confirmations from suppliers. It was submitted that wholesale trading commenced in the financial year 2015-16, which accounted for the increase in sales and reduction in gross profit margin. It further argued details of expenses and argued that the deposits were out of accounted business transactions.

Represented by Bhangepatil Pushkaraj Ramesh, the Revenue argued that the assessee failed to substantiate the sources of the cash deposits with reliable evidence. He submitted that the CIT(A) erred in admitting additional evidence in violation of Rule 46A without awaiting the remand report, and that the identity of the alleged suppliers remained unverified.

The Bench comprising Accountant Member, Narendra Kumar Billaiya and Judicial Member, Sunil Kumar Singh observed that while the assessee had not fully complied during the assessment stage, the CITA(A) also did not verify the genuineness of the suppliers’ details nor ensured a remand report was obtained from the AO.

The Tribunal held that the matter required proper verification at the assessment stage. Thus, the Tribunal remanded the issue back to the AO with directions to re-examine the evidence and the suppliers’ credentials after giving due opportunity to the assessee.

Accordingly, restoring the matter for fresh assessment.

Therefore, ITAT allowed the Revenue’s appeal for statistical purposes

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