ITAT holds that deposits of Rs. 1.29 crore by fruit vendor represent business turnover, not unexplained cash credits, Income estimated at 8% and Section 68 addition deleted.
Meetu Kumari | Nov 26, 2025 |
ITAT Applies 8% Profit Rate and Treats Cash Deposits as Business Turnover for Fruit Dealer
The assessee is engaged in the unregistered fruit trade, purchasing seasonal fruits from farmers and supplying them to wholesalers. As fruit trading is exempt under KVAT and GST, he was not required to maintain statutory accounts or obtain VAT/GST registration. For AY 2015-16, the assessee neither maintained books nor filed a return of income. The case was reopened under Section 147 after the department noticed substantial bank deposits of Rs. 1,59,30,000.
During reassessment, the assessee filed his return on 25.05.2023, declaring sales of Rs. 9,280,000 and a net profit of Rs. 818,588. The AO rejected all evidence for lack of “corroborative documents” and treated the entire deposit of Rs. 1,29,16,984, cash and cheques together, as unexplained credits under Section 68. Savings bank interest was separately added.
The CIT(A)/NFAC upheld the additions, citing RBI restrictions on cash transactions, even though the matter pertained to AY 2015-16 and had no link to demonetization.
Issue Raised: Whether the AO was justified in treating the entire bank deposits of Rs. 1.29 crore as unexplained cash credits under Section 68 when the assessee claimed business turnover from fruit trading, especially when the same business was accepted as genuine by the department in AY 2016-17.
Tribunal Ruled: The Tribunal noted that during AY 2016-17, the same Assessing Officer had accepted Abdul Jaleel’s fruit business as genuine in reassessment proceedings. Once the existence of the business was accepted in the later year, rejecting the same claim for AY 2015-16 without contrary material was held to be unjustified. The ITAT also criticised the CIT(A)’s reliance on RBI restrictions irrelevant to the assessment year.
The Tribunal adopted a pragmatic view and held that the entire bank deposits of Rs. 12,916,984 should be treated as business turnover. The AO was directed to compute income at 8% of the total receipts, consistent with the assessee’s declared results. Savings bank interest was rightly taxable under “Income from Other Sources,” and a deduction under Section 80TTA of Rs. 10,000 was allowed.
The appeal was thus partly allowed.
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