ARTHANARI MUDALIAR MATHAVAN,SALEM V. ITO, WARD-1(6), SALEM

ITA 2898/CHNY/2024

AI Insights

The case involves Arthanari Mudaliar Mathavan, the proprietor of Sri Murugan Textiles, who appealed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi. The appeal was against the additions made by the Assessing Officer, which treated cash deposits during the demonetization period as unexplained and unaccounted income under section 69A of the Income Tax Act, 1961. The Tribunal found that the additions were not justified as the deposits were business receipts and reflected in the books of account. The matter was remanded for further verification with the books of account.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 107462 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C. MURUGESAN
• Assessee Lawyers: S.SENTHIL KUMAR; ER
• Keywords: Condonation of delay; Business income; Income from undisclosed sources
• Section: 69A

Judgement Text

"आयकर अपीलीय अिधकरण, ’बी’ Ɋायपीठ, चेɄई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI ŵी एस.एस. िवʷनेũ रिव, Ɋाियक सद˟ एवं ŵी जगदीश, लेखा सद˟ क े समƗ । Before Shri S.S. Viswanethra Ravi, Judicial Member & Shri Jagadish, Accountant Member आयकर अपील सं./I.T.A. No.2898/Chny/2024 िनधाŊरण वषŊ/Assessment Year: 2017-18 Arthanari Mudaliar Mathavan, Prop. Sri Murugan Textiles, 140-A, Kalarampatty Main Road, Salem 636 015. [PAN:AJCPM1849E] Vs. The Income Tax Officer, Ward 1(6), Salem. (अपीलाथŎ/Appellant) (ŮȑथŎ/Respondent) अपीलाथŎ की ओर से / Appellant by : Shri S. Senthil Kumar, Advocate, Er. ŮȑथŎ की ओर से/Respondent by : Shri C. Murugesan, Addl. CIT सुनवाई की तारीख/ Date of hearing : 04.02.2025 घोषणा की तारीख /Date of Pronouncement : 07.02.2025 आदेश /O R D E R PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER: This appeal filed by the assessee is directed against the order dated 18.09.2023 passed by the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi for the assessment year 2017-18. 2. We find that this appeal is filed with a delay of 350 days. The assessee filed an affidavit for condonation of delay stating the reasons. Upon hearing both the parties and on examination of the said affidavit, we I.T.A. No.2898/Chny/24 2 find the reasons stated by the assessee are bonafide, which really prevented in filing the appeal in time. Thus, the delay is condoned and admitted the appeal for adjudication. 3. The assessee raised 6 grounds of appeal amongst which, the only issue emanates for our consideration as to whether the ld. CIT(A) is justified in confirming the additions made by the Assessing Officer on account of treating cash deposits during demonetization period as unexplained and unaccounted income under section 69A of the Income Tax Act, 1961 [“Act” in short]. 4. We note that the Assessing Officer found the assessee made cash deposits during demonetization period to an extent of ₹.11,88,650/-, which is evident from para 1 of the assessment order. Further, the Assessing Officer held that the total deposit as found in the 2 accounts in Canara Bank to an extent of ₹.66,67,491/-. We find that out of the said amounts, ₹.54,78,841/- was considered as business receipt and proceeded to adopt 8% as net income on estimation basis. Remaining amount of ₹.11,88,650/- [₹.66,67,491 – 54,78,841] was added as unexplained income. Before the ld. CIT(A), the assessee contended that the addition made on account of unaccounted income was also business receipt, which cannot be added on account of unaccounted income for I.T.A. No.2898/Chny/24 3 the reason that it was deposited during the demonetization period. We note that the ld. CIT(A) directed the Assessing Officer to consider the profit rate as shown by the assessee in the return of income instead of taking into account the estimated profit rate at 8%, but, however, confirmed the addition made under section 69A of the Act. 5. Before us, the ld. AR Shri S. Senthil Kumar, Advocate, Er., argued that both the authorities fell in error in making the addition under section 69A of the Act as the amount deposited therein are reflected in the books of account. He vehemently argued that the said deposit is arising out of business of the assessee and it should be treated as trade receipt instead of holding as unaccounted income. He further argued that the Assessing Officer, without making any adverse reference to the books of account, made the above addition only on the ground that the said amount was deposited during demonetization period, which is not justified. 6. The ld. DR Shri C. Murugesan, Addl. CIT opposed the same as he refers to assessment order as well as impugned order and submits that despite having ample opportunities before the authorities below, the assessee did not furnish anything in detail in support of the contention made before the Tribunal. He refer to the impugned order and argued that there was no substantial evidence brought on record by the assessee in I.T.A. No.2898/Chny/24 4 respect of his claim of disputed amount in respect of addition made under section 69A of the Act represents business receipt. He pleaded to dismiss the ground raised by the assessee. 7. Admittedly, there is no dispute with regard to the business of the assessee as it is clear that the Assessing Officer himself given benefit of business receipt in respect of cash deposits made by the assessee other than the deposits made during demonetization period. The ld. CIT(A) held the profit rate at 8% as adopted by the Assessing Officer is not reasonable and directed the Assessing Officer to accept the profit as shown by the assessee in the return of income. Therefore, we find force in the argument of the ld. AR that the amount disputed in respect of addition under section 69A of the Act is also arising out of business receipt, but, however, nothing was brought on record before us to show the same. Further, as rightly pointed out by the ld. CIT(A) in holding that the Assessing Officer in estimating and adopting profit at 8% is not acceptable in the absence of rejection of books of account. Therefore, we accept the argument of the ld. AR in remanding the matter to the file of the Assessing for considering the issue of addition made under section 69A of the Act for verification with reference to the books of account. The finding of the ld. CIT(A) in directing the Assessing Officer to accept the I.T.A. No.2898/Chny/24 5 net profit rate as shown in the return of income remains intact. Thus, the grounds raised by the assessee are allowed for statistical purposes. 8. In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced on 07th February, 2025 at Chennai. Sd/- Sd/- (JAGADISH) ACCOUNTANT MEMBER (S.S. VISWANETHRA RAVI) JUDICIAL MEMBER Chennai, Dated, 07.02.2025 Vm/- आदेश की Ůितिलिप अŤेिषत/Copy to: 1. अपीलाथŎ/Appellant, 2.ŮȑथŎ/ Respondent, 3. आयकर आयुƅ/CIT, Chennai/Madurai/Coimbatore/Salem 4. िवभागीय Ůितिनिध/DR & 5. गाडŊ फाईल/GF. "