MIRNAL MEHTA,CUTTACK vs. ITO WRD-2(4), CUTTACK

Ld. AR has filed his written submissions, which read as under :- WRITTEN SUBMISSION Facts of the Case -- The appellant is an individual deriving income from business. The appellant filed his audited Return of Income for the aforesaid assessment year. The appellant's return was selected for scrutiny by CASS on reason for substantial cash deposits in banks. Notices were served on appellant regarding the matter for verification. In response to the notices and show cause notices the appellant produced all the materials alongwith books of accounts and all the bank accounts statement for verification. The same was duly verified by the Assessing Officer and assessment was completed u/s 143(3) on 31/12/2019. The AO on verification of bank accounts found that the assessee has deposited Rs.58,65,000/- in the bank account with ICICI Bank Ltd. and treated as an unaccounted cash sales of the assessee and thus gross profit of the assessee was estimated @ 8% on the total Rs.58,65,000/- which comes to Rs.4,69,200/- and the same was added to the total income declared by the assessee. Penalty was imposed u/s.270A for under reporting of income of Rs.4,69,200/-. The penalty imposed by the AO was on account of estimated profit from the alleged undisclosed sales. The additions on account of transactions has been made on estimated basis by applying GP @ 8% on the sales. The learned CIT(A) erred in not dealing properly with the appeal filed by the appellant and was also not justified to confirm the penalty order and dismiss the appeal without justifying and just following the order of the AO. The AO has also stated that since the appellant has not filed appeal against the aforesaid additions as made in the assessment order it shows that the appellant has no plea to offer and concluded that the above transactions is concealed. The learned CIT(A) following the order of the AO confirmed the penalty. Appellant Contentions: The Assessment was made on the additions on account by estimating the GP @ 8% on the sales. Penalty was imposed on under reporting of income. It is a trite law that any additions made on account of estimated rate of profit does not amounts to under reporting or concealment of income as such there can be no question of imposing of penalty. Moreover, merely because the appellant had not filed any appeal against the additions cannot be a ground for imposing penalty. There are plethora of case laws which held that when income is estimated, then, there can be no question of imposing penalty. PRAYER: In the circumstances, it is a clear that on the basis of estimation addition made cannot lead to penalty and as such the same should be deleted in the interest of justice.

It was the submission by the ld. AR that the original assessment in the case of assessee came to be completed u/s.143(3) of the Act on 31.12.2019. It was the submission that in the course of assessment the AO had made an addition by estimating the income of the assessee at 8% of the undisclosed cash deposit treating the same as turnover in ICICI bank, Ahmadabad, Gujarat. It was the submission that the transactions in the bank account were part of the turnover of the assessee and the same was also been disclosed in the turnover of the assessee. It was the submission that the addition by estimation of the income in respect of the alleged cash deposit being only to an extent of less than Rs.5 lakhs of the tax effect, is being less than Rs.50,000/-. Considering the economics of fighting an appeal the assessee had not contested the issue. It was the submission that the cash deposits are out of the business of the assessee and the cash deposits are also reflected in the bank account of the assessee. No difference in the stock maintained by the assessee has also been pointed out nor has any undisclosed transaction being found. It was the submission that just because the income of the assessee has been estimated, it cannot be held that the assessee has under reported its income.

In reply, ld. Sr. DR submitted that the fact that the assessee has not filed an appeal shows that he has accepted the addition and acceptance of the addition is in effect the acceptance of the fact that his income was under reported and the penalty levied u/s.270A of the Act and as confirmed by the ld. CIT(A) is liable to be upheld. It was also further clarified by the ld. Sr. DR that after the original assessment order the assessment had been reopened and the reassessment had also been completed on 30.03.2022, wherein additions have been made, which was the subject matter of an appeal before the Tribunal in ITA No.169/CTK/2023. It was the submission that the Tribunal has quashed the reopening of the assessment, consequently the original assessment