JITENDRAKUMAR HARPALDAS PANJVANI,SABARKANTHA vs. ITO, SABARKANTHA WARD-2, HIMMATNAGAR

The solitary substantial grievance of the assessee is that the learned CIT(A) has erred in confirming the addition of Rs.9,92,423/- which was added by the Assessing Officer with the aid of Section 68 of the Income-tax Act, 1961 (“the Act” in short).

The brief facts of the case are that the assessee is an individual running Kariyana Store (General Store). He has filed his return of income on 18.09.2015 showing total income of Rs.2,58,810/-. The case of the assessee was selected for scrutiny assessment and a notice under Section 143(2) of the Act was issued and served upon the assessee. The learned Assessing Officer found that the assessee has offered his income under Section 44AD of the Act by showing gross turnover/receipt at Rs.35,91,795/-. However, after the notice, the SMC- Jitendrakumar Harpaldas PanjvaniVs. ITO For AY: 2015-16 2 assessee has revised the gross sales to Rs.41,06,918/- and declared deemed profit under Section 44AD of the Act @ 8% at Rs.3,28,553/-. The assessee has revised his return. The learned Assessing Officer has rejected this claim of the assessee. He observed that there was cash deposit of Rs.4,77,300/- and in order to explain the cash deposit in the bank the assessee has took a plea that he made cash sales. The Assessing Officer further observed that in the VAT return he has shown Rs.35,91,795/-. So he made 2 additions viz. cash deposits of Rs.4,77,300/- and difference between the revised gross sales vis-à-vis declared in the VAT return, i.e. Rs.41,06,918 – Rs.35,91,794. This comes to Rs.5,15,124/-. In this way, a total addition of Rs.9,92,423/- under the head “unexplained cash credit” has been made.

Appeal to the leaned CIT(A) did not bring any relief to the assessee.

I have duly considered the rival contentions and gone through the record carefully. I fail to appreciate the logic assigned by the Assessing Officer. The assessee has made small deposits in the bank and accounted all these deposits as a cash sale. The Act authorizes small assessees to declare a deemed profit. The assessee has revised his return and enhanced deemed profit by enhancing the turnover, but it is within the permissible limit. The Assessing Officer assumed that VAT return is a correct return without expecting that the assessee might have revised that also in future or must have not been confronted with the VAT authorities. How this difference between both the gross receipts would become unexplained cash credits? He simply disbelieved the explanation of the assessee; whereas the provisions of Section 44AD of the Act authorizes all this type of assessees not to maintain any documents and just declare the profit at a fixed rate, i.e. 8% of the gross receipts. The Assessing Officer should have not interfered in this working by disbelieving the claim made by the assessee. I, therefore, allow the appeal of the assessee and delete

In the result, appeal filed by the assessee is allowed.