INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 on account of unexplained deposit - Cash deposits of special Bank Notes of Rs. 500 and Rs. 1,000 made during the demonetization period -

Assessee had not filed his income-tax return for assessment year 2017-18. AO issued notice under section 142(1) and directed assessee to submit his return of income. According to AO, assessee finally filed his return of income showing income of Rs. 2,86,934. AO noted that assessee had deposited cash wherein the currency notes of the denomination of Rs. 500 and Rs. 1,000 was declared no longer a legal tender. Since the source of the cash was not explained by assessee, AO made addition under section 68. Held: Since AO accepted the assessee's claim that he was involved in eligible business in accordance with section 44AD and total deposit comes to Rs. 59,46,583 and out of which Rs. 50,71,083 was accepted by AO as turnover from eligible business just because the assessee had with him an amount of specified notes which he deposited in banks could not be taken adversely against the assessee. He had demonstrated that he was into business of tea-trading and as noted from the extracts of daily bank book, there were several deposits and payments/withdrawals regularly, therefore, the deposit cannot be said to be as a result of non-genuine business receipt or a case of black money and addition was not warranted and it was directed that profit embedded need to be taxed @ 8%.

REFERRED :

FAVOUR : Partly in assessee's favour.

A.Y. : 2017-18

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