Re-Deposited Cash from Withdrawals Not Turnover: ITAT quashes Rs. 33.7 Lakh Income Addition [Read Order]

Sh. Sita Ram Saini, the assessee, had filed his return for the Assessment Year 2014–15, declaring total income of Rs. 2,60,490 and agricultural income of Rs. 1,50,280. The case was selected for limited scrutiny due to substantial cash deposits in bank accounts totaling Rs. 79,95,179. Since the assessee did not provide a full explanation during the assessment proceedings, the AssessingOfficer completed the assessment ex parte under Section 144 and treated the entire amount as unexplained cash credit under Section 68 read with Section 115BBE.

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On appeal before the CIT(A), the assessee argued that Rs. 46,27,013 of the total deposits represented business turnover, and the remaining Rs. 33,68,166 was cash re-deposited from earlier withdrawals and cash on hand. The assessee submitted bank statements, a cash book, and sales bills as supporting documents. The CIT(A), however, applied the presumptive taxation rate of 8% under Section 44AD to the entire Rs. 79,95,179, treating the full amount as gross business receipts.

On further appeal before the ITAT, the assessee’s counsel argued that the Assessing Officer had already accepted Rs. 46.27 lakh as business turnover and that the remaining Rs. 33.68 lakh had been adequately explained through withdrawals and cash sales, which were recorded in the cash book. They also submitted a day-wise cash book showing that a sufficient cash balance was available before each deposit.

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The two-member bench comprising Rathod Kamlesh Jayantbhai (Accountant Member) and Sudhir Pareek (Judicial Member) observed that since the same cash book had been accepted by the AO to verify Rs. 46.27 lakh as turnover, the assessee's explanation that the remaining deposits were made from earlier cash withdrawals and cash sales was plausible and supported by evidence.

The tribunal held that the CIT(A) was not justified in treating the re-deposited Rs. 33.68 lakh as turnover and applying an 8% income estimate on it. The tribunal allowed the appeal and deleted the addition, ruling that only actual turnover of Rs. 46.27 lakh was eligible for income estimation under Section 44AD.

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