No Addition on Income when the Assessee has Fully Explained and Substantiated Sources with the Documentary Evidences: ITAT [Read Order]

The Indore Bench of The Income Tax Appellate Tribunal ( ITAT ) has held that no addition on income when the assessee has fully explained and substantiated sources with the documentary evidences. The assessee, an individual carrying on the business of real estate developers, under a sole proprietorship, in the name and style of 'M/s. Royal Colonizers, Builders and Developers'. During the course of the assessment proceedings, AO, from the Individual Transaction Statement (ITS) generated from the System of the Department, noted that during the relevant previous year, the assessee had made total deposits of Rs.2,85,38,400/- in cash in his various bank accounts whereas he had not shown any sales or advance received in his return of income and therefore, the entire deposit amount of Rs.2,85,38,400/- was added to the total income of the assessee u/s. 68 of the Act. Aggrieved assessee preferred an appeal for the assessment year under consideration before the CIT (A) making detailed submissions along with the documentary evidences. The CIT (A) after considering the AO’s remand reports submitted by the AO as well as the rejoinders of the assessee thereon, documentary evidences and other materials placed on record, arrived at a conclusion that the assessee had duly explained source of each and every cash deposit made by him in his bank accounts through various statements and documentary evidences and during the remand proceedings, the AO could not find any specific defect or discrepancy in the explanation of the assessee or any of the documentary evidences so furnished by him. Accordingly, the CIT (A) deleted the entire addition of Rs.2,85,38,400/- made by the AO on account of unexplained cash deposits. Aggrieved with the Order of the CIT (A), the revenue preferred appeal before ITAT. Tribunal has observed that except having the information through ITS as regard to the deposit AO was not having any adverse material or information on his record. It is an undisputed fact that the appellant is carrying out the business of real estate. The AO himself in the body of the assessment order has stated that the appellant had launched various projects. The AO has also observed that the appellant was also making booking of plots and developing colonies. Further, from the body of the assessment order, it also emanates that during the course of survey u/s. 133A of the Act in the appellant’s business premises no incriminating material or document relating to the assessment year under consideration was found and the AO has not made reference of any such incriminating material. We find that the appellant, in his return, had shown income of Rs. 30,41,000/- and had also shown his turnover for the assessment year 2011-12 as per the registered sale deeds executed to the extent of Rs. 2,35,88,600/-. We find that in the remand report AO has not rebutted such factual statement of the appellant. Thus the findings given by the AO, framing the assessment, that the appellant had not shown any sales in his return of income is factually incorrect. It is generally accepted that in respect of any assessee carrying out business, the entire deposits made in his bank accounts cannot be regarded as the income of the assessee. A businessman is invariably required to incur corresponding expenses against the deposits made in bank accounts. So, it is only the net profit element which can be subjected to tax. It was observed by the Tribunal that the appellant by furnishing the date wise inflow outflow of cash, details of the customers from whom advances were received and copies of the sale deeds, executed subsequently, could be said to be able to discharge his onus of establishing the sources of cash deposits made in his various bank accounts during the year under consideration. Further, observed by the Tribunal that, since, the AO has accepted the turnover as well as Net-Profit shown by the appellant in his return of income, merely on the basis of making of deposits in bank accounts, no addition can be sustained specially in a circumstance when the appellant has fully explained the sources of each and every deposits made in his bank accounts and has also substantiated such sources with the documentary evidences. The Coram of Sri Mahavir Prasad, Judicial Member and Sri Manish Borad, Accountant Member has held that “by furnishing the various documentary evidences, the assessee has satisfactorily explained each and every cash deposit made by him in his bank accounts, AO could neither find any specific defect or discrepancy in the explanation of the appellant or any of the documentary evidences so furnished by him and also during the course of the survey proceedings carried out in the assessee’s premises, no incriminating material for the year under consideration was found and even the learned AO has not made reference of any of the materials found during the course of the survey. We therefore under the given facts and circumstances of the case , find no infirmity in the finding given by the CIT (A) for deleting the addition of Rs.2,85,38,400/- made by the AO on account of unexplained cash deposits under section 68 of the Act. Accordingly, the findings given by the CIT (A) are upheld”. 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