Taxing cash deposits without giving corresponding credits to the withdrawals is not justified especially where the assessee was a small trader

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Taxing cash deposits without giving corresponding credits to the withdrawals is not justified especially where the assessee was a small trader.

Sanjay Jain Vs ITO
– Assessee’s appeal partly allowed: DELHI ITAT
THE assessee is an individual engaged in the business of readymade garments and filed his return of income declaring the total income at Rs.2.6 lakh.
During the course of assessment proceedings, the AO noted that the assessee had deposited cash amounting to Rs.32.5 lakh in the savings bank account maintained with the Punjab National Bank.
On being asked by the AO to explain the source of such cash deposit of Rs.32.5 lakh, the assessee furnished the cash book of M/s Om Sai Ram Garments in which the assessee was a proprietor without any supporting bills/vouchers.
Since the assessee did not furnish the supporting bills and vouchers, the AO held that the genuineness of purchase and sales cannot be substantiated and this was bogus sale and purchase. He noted that the assessee had declared gross turnover or gross receipt amounting to Rs.13.5 lakh and had offered Rs.2.8 lakh for taxation.
Since the assessee’s total deposit of Rs.35.6 lakh was for the period from 01.04.2014 to 31.03.2015 and the assessee had declared gross receipt of Rs.13.5 lakh , therefore, the AO, invoking the provisions of section 69A, made an addition of Rs.22 lakh (i.e., Rs.35.6 lakh (-) 13.5 lakh). The AO accordingly determined the total income at Rs.24.8 lakh. On appeal, CIT(A) confirmed order of AO. Aggrieved assessee filed appeal before tribunal.
On appeal, the tribunal held that,
Whether taxing cash deposits without giving corresponding credits to the withdrawals will be justified especially where the assessee was a small trader – NO : ITAT
++ it was an admitted fact that as against the total deposits in the bank account of Rs. 35 lakh , the assessee had shown a turnover of only Rs. 13.5 lakh for which the AO made the addition of Rs.22 lakh which was upheld by the CIT(A). It was the submission of the assessee that the assessee had shown a GP rate of 20.89% and, therefore, the same rate should be applied to the entire deposits since such deposits are nothing, but, suppressed turnover.
It was the alternate contention of the assessee that only the peak credit should be added and not the entire deposits in the bank account since the corresponding withdrawals from the said bank account have not been considered.
A perusal of the deposit and withdrawals in the said bank account filed by the assessee shows that there are systematic deposits as well as withdrawals.
The assessee was engaged in the business of readymade garments, therefore, taxing only the deposits without giving corresponding credits to the withdrawals, in court’s opinion, will be not justified in the instant case especially when the assessee was a small trader.
Since the peak credit comes to Rs.7,70,390/-, court, therefore, modify the order of the CIT(A) and restrict the addition to Rs.7,70,390/-.
The grounds raised by the assessee are accordingly partly allowed.
ITA No.3314/Del/2019
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