Relief to Contractor: ITAT Deletes ₹12.44 Lakh Income Tax Addition u/s 68 on Cash Deposits, Recognises Receipts as Business Income from Construction Contracts [Read Order]

The assessee Jitudan Ravatdan Gadhvi failed to file his return of income for the AY 2012–13. The AO observed that during the impugned assessment year, the assessee had deposited a total of ₹11,94,000/- in cash into his bank account with Axis Bank Ltd. Based on this information, the Assessing Officer initiated re-assessment proceedings under

Despite the issuance of notice, the assessee did not file a return and neither did the assessee respond to multiple notices. In view of the repeated non-compliance by the assessee and in the absence of any response or evidence, the AO proceeded to complete the assessment. Accordingly, the entire amount of deposits was treated as unexplained cash credit and added to

the total income.

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In appeal, CIT(A) dismissed the appeal of the assessee on account of the delay of 477 days in filing of appeal before him.

The assessee submitted that the addition of ₹12,44,754/- made on account of cash deposits and bank interest was not sustainable, since the deposits were not unexplained but were sourced from his business activity in the construction sector. The assessee further submitted that the contract receipts from the business were directly credited into the assessee’s savings account with Axis Bank, and that the assessee paid the operational expenses in cash after making withdrawals from the same account.

Any surplus cash that remained after meeting business expenses, like labour payments, was subsequently re-deposited by the assessee into the same bank account.

The assessee presented a reconciliation showing a total of ₹14,01,835/- was deposited in cash during the year, while total withdrawals from the same account amounted to ₹38,75,500/-, resulting in a net cash withdrawal of ₹24,73,665/-. According to the assessee, this demonstrates that the assessee had the availability of adequate funds to justify the redeposits.

The two-member bench of Dr BRR Kumar (Vice President) and Siddhartha Nautiyal (Judicial Member) held that the cash deposits are sufficiently explained through the assessee’s own bank transactions and business activity. The source of the cash deposits stands reconciled and duly supported by records, and hence the addition made under section 68 of the Act is not sustainable. The Tribunal set aside the addition of ₹12,44,754/-.

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