Transport Business Receipts or Undisclosed Income? ITAT Remands Rs 34.86 Lakh Cash Deposit Addition Case

The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has provided relief to taxpayer Karam Veer by setting aside the orders of the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] and remanding the matter back to the AO for fresh assessment.

The dispute arose after the Income Tax Department found cash deposits of Rs 19.88 lakh in the assessee’s bank account during the financial year 2011-12, and the assessee had not furnished any income tax return (ITR) for the relevant AY. Since no income tax return had been filed for Assessment Year 2012-13, the AO reopened the assessment and also noticed additional credit entries of Rs 14.98 lakh. As the assessee did not properly comply with several notices issued during reassessment proceedings, the tax authorities treated both amounts as undisclosed income and also disallowed a deduction of Rs 1 lakh claimed under Chapter VI-A.

When the case was taken before the lower appellate authority, i.e., CIT(A), the assessee submitted additional evidence and claimed that he had filed a return in response to the notice issued under Section 148 by opting for presumptive taxation. However, the CIT(A) refused to accept the additional evidence and sustained all the impugned additions made by the tax authorities.

Before the Tribunal, the assessee argued that it was engaged in the transportation business and had mistakenly filed the return under Section 44AE instead of Section 44AD. He further contended that returns filed under Section 44AD in subsequent years had been accepted by the department and that the bank deposits represented transportation business receipts.

The Tribunal observed that the assessee’s claims and supporting documents had not been properly examined by the lower authorities. In the interest of natural justice, it directed the AO to conduct a fresh assessment, admit and examine the evidence filed by the assessee, and determine eligibility for presumptive taxation under Section 44AD, if the statutory conditions are satisfied.

The tribunal had noted that, “The assessee is also now changing its stance and submitting before the Bench, that return of income filed u/s 44AE be treated as return of income u/s 44AD , as the assessee is plying more than 10 trucks. The assessee has never filed details of trucks even before ld. CIT(A) as also even not before me. Thus, keeping in view in the entire factual matrix of the case, it will be fair and just to both parties and keeping in view principles of natural justice, the orders of both the authorities below are set aside”.

Accordingly, the appeal was allowed for statistical purposes.