BADAMIDEVI PARASMALJI,CHENNAI V. INCOME TAX OFFICER, CHENNAI

ITA 2659/CHNY/2024

AI Insights

The case involves an appeal by Badamidevi Parasmalji against the order of the Commissioner of Income Tax (Appeals), which confirmed the addition of Rs.13,91,000 as unexplained cash deposits during the demonetization period in the assessment year 2017-18. The Income Tax Officer had initially assessed the deposits, questioning their source, as the assessee had insufficient cash balance to justify such deposits. The Tribunal found that the Assessing Officer had not considered the cash balances of the proprietary concern, M/s Foto House, separately maintained from the individual accounts. The Tribunal accepted part of the assessee's arguments, allowing a partial relief.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 360753 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-05-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M. ASWATHY
• Assessee Lawyers: AKSHITH JAIN
• Keywords: Unexplained investment
• Section: 142(1)

Judgement Text

" आयकर अपील य अ धकरण ‘सी’ \u000eयायपीठ चे\u000eनई म\u0016। IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH, CHENNAI माननीय \u0006ी मनोज क ुमार अ वाल ,लेखा सद\u0014 एवं माननीय \u0006ी मनु क ुमार िग\u0019र, \u001aाियक सद\u0014 क े सम\u001b। BEFORE HON’BLE SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER AND HON’BLE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER आयकरअपील सं./ ITA No.2659/Chny/2024 (िनधा रणवष / Assessment Year: 2017-2018) Badamidevi Parasmalji, No.443, Mint Street, Sowcarpet, Chennai 600 001. [PAN: AAGPP 9584L] Vs. The Income Tax Officer, Non Corporate Ward 4(5) Chennai. (अपीलाथ\u0007/Appellant) (\b यथ\u0007/Respondent) अपीलाथ\u0019 क\u001a ओर से/ Appellant by : Shri Akshith Jain, C.A., यथ\u0019 क\u001a ओर से /Respondent by : Ms. M. Aswathy, JCIT सुनवाई क\u001a तार ख/Date of Hearing : 24.02.2025 घोषणा क\u001a तार ख /Date of Pronouncement : 21.05.2025 आदेश / O R D E R PER MANU KUMAR GIRI (Judicial Member) This appeal by the assessee is arising out of the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi in order No.ITBA/NFAC/S/250/2024-25/1065954734(1) dated 24.06.2024. The assessment was framed by the Income Tax Officer, Non Corporate Ward 4(5), Chennai for the assessment year 2017-18 u/s.143(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’), vide order dated 26.11.2019. 2 ITA No.2659/Chny/2024 2. The registry has noted delay of 56 days in filing the appeal. Considering the period of delay and reasons deposed in the affidavit given by assessee, we find it sufficient cause, hence condone the delay and admit the appeal for adjudication. 3. The assessee is an individual and filed her return of income for the Asst. year 2017-18 admitting income of Rs.6,34,390/-, the case was selected under Limited Scrutiny in CASS for verification of cash deposits made during demonetization period. A notice u/s 143(2) of the Act dt.21.9.2018 was issued and served on the assessee. Subsequently, notice u/s 142(1) dt. 13.5.2019 was issued to the assessee calling for the nature and source of the cash deposits during demonetization period along with documentary evidence. The ld. Assessing Officer found that in the assessment year 2017-18, the assessee had made cash deposits in demonetized currency of Rs.11,41,000/- in the bank account of M/s. Foto House, of which the assessee is the proprietrix and Rs.2,50,000/- in her savings bank account. The ld. Assessing Officer obtained a copy of the bank statement from Indian bank held in the name of the assessee and in the name of M/s.Foto House. Since there was no response to the notices issued, a letter dt 22.6.2019 was issued to the assessee to furnish the details called for. In response, the assessee vide letter dt. 14.8.2019 stated that deposits made during the demonetization period are through opening cash in hand from the proprietorship concern which was discontinued in F.Yr.2015- 16\". The assessee also submitted the capital account, statement of affairs and computation of income for the year ended 31.3.2017 and year ended 31.3.2016. The ld. Assessing Officer found from the statement of affairs for the year ended 3 ITA No.2659/Chny/2024 31.3.2016 that the assessee had cash balance of only Rs.26,898/- whereas the assessee had made cash deposit of Rs.1,45,000/- on 15.11.2016 and Rs.9,96,000/- on 22.11.2016, thus totaling to Rs. 11,41,000/-. The ld. Assessing Officer found that since the assessee did not have sufficient opening cash balance in the statement of affairs submitted for the year ended 31.3.2016, a show cause notice dt.12.10.2019 was issued to the assessee as to why the cash deposit to the tune of Rs.11,41,000/- made during the demonetization period should not be treated as her unexplained investment, as the assessee had not explained the source for the income and had also not recorded in the books of account. The assessee submitted that that until the preceding previous year, assessee had a business namely M/s.Foto House which was discontinued in the preceding previous year. The data such as capital account, balance sheet, profit and loss account and other schedules which were maintained in the above stated business were not merged with her individual balance sheet for the sole reason that the creditors and the debtors of the business were yet to be settled. This was the same reason why the bank accounts were still active in order to receive such receivables and payables of the business in the business itself. However, the ld. Assessing Officer was not impressed by the reply of the assessee and made an addition of Rs.13,91,000/- as cash deposits in demonetized currency. Aggrieved, assessee preferred an appeal before the ld. CIT(A). 4. The ld. CIT(A) confirmed the action of the Assessing Officer. Aggrieved, assessee is in appeal before us. 4 ITA No.2659/Chny/2024 5. Before us, the ld.AR has filed cash flow (cash book) from 01.04.2016 to 31.03.2017 of individual and M/s Foto House. The ld. AR argued that the assessee had deposited cash to the tune of Rs.13,91,000/- out of the closing balance of cash till the date of deposit. He further stated that the closing cash balances were already charged to income tax in the form of sales. In support of claim, the appellant has filed cash book from 01.04.2016 to 31.03.2017 of individual and M/s Foto House. However, the AO completely neglected the cash balances of the proprietary concern. 6. Per contra, the ld.DR has vehemently relied upon the impugned order and prayed for the dismissal of the appeal. 7. We have heard the rival submissions and perused the cash book and orders of the lower authorities. It is not in dispute that the assessee operated a proprietary concern in the name and style of M/s Foto House and the financial records of the firm and the individual were maintained separately. It is the plea of the assessee that the balances of loans payable (loans-liability), loans receivables (loans & Advances) and fixed assets as mentioned in the audited financial statements were appropriately transferred to proprietor’s personal accounts & creditors, cash and bank balances were continued in the books of accounts of the business in order to enable a clearer picture of receipts and payments directly associated with the business activities. However, the AO only considered the balances in the financials of individual and completely ignored the cash balances of the proprietary concern. We are also of the view that AO should have taken into consideration the cash 5 ITA No.2659/Chny/2024 balances of the proprietary concern. Be that as it may be, to cut short the controversy, we treat the deposit of Rs.2,50,000/- as genuine in individual saving account, however, we estimate only 20% of the cash deposits in the bank account of the proprietorship firm as not out of explained sources. Accordingly, we estimate income of 20% on impugned deposit of Rs.11,41,000/- which comes to Rs.2,28,200/- which would be over and above the admitted income of Rs.6,34,390/-. The same would be chargeable to tax at normal rates. The Ld. AO is directed to re-compute the income of the assessee accordingly. 8. In result, appeal of the assessee stand partly allowed. Order pronounced in the open court on 21st May, 2025. Sd/- Sd/- (मनोज क ुमार अ वाल) (मनु क ुमार िग\u0019र) (MANOJ KUMAR AGGARWAL) लेखा सद\u0014 / ACCOUNTANT MEMBER (MANU KUMAR GIRI) \u001aाियक सद\u0014 / JUDICIAL MEMBER चे\u0003ई Chennai: िदनांक Dated : 21-05-2025 KV आदेश क\u001a (त)ल*प अ+े*षत /Copy to : 1. अपीलाथ\u0010/Appellant 2. \u0011\u0012थ\u0010/Respondent 3. आयकरआयु\u0017/CIT, Chennai/Coimbatore/Madurai/Salem. 4. िवभागीय\u0011ितिनिध/DR 5. गाड फाईल/GF "