GANESWARA RAO ADAPA,VADDADI vs. ITO, ANAKAPALLI

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ITA 485/VIZ/2025Status: DisposedITAT Visakhapatnam10 July 2026AY 2019-2011 pages
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What did the Tribunal hold?

The Tribunal reduced the estimated business income from 8% to 5% of turnover, deleted the addition of Rs. 70,000 as it was already considered in the turnover estimation, and upheld the addition of Rs. 1,16,397 as salary, allowing for statutory benefits.

What were the facts?

The assessee's appeal concerned the estimation of business income and additions for unexplained cash deposits and salary receipts. The Assessing Officer (AO) estimated business income at 8% of turnover, added Rs. 70,000 for unexplained cash, and Rs. 1,16,397 as salary. The Commissioner (Appeals) confirmed these additions.

What were the issues?

Whether the estimation of business income at 8% was justified and if separate additions for cash deposits and salary were permissible when income was estimated on total turnover.

Which sections of the Income-tax Act were involved?

Section 147,Section 144,Section 69A,Section 44AD

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM

आयकर अपीऱीय अधिकरण, विशाखापत्तनम पीठ, विशाखापत्तनम INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM श्री उदयन दास गुप्ता, माननीय न्याययक सदस्य एिं श्री ओम्कारेश्िर धिदारा, माननीय ऱेखा सदस्य SHRI UDAYAN DAS GUPTA, HON’BLE JUDICIAL MEMBER AND SHRI OMKARESHWAR CHIDARA, HON’BLE ACCOUNTANT MEMBER ITA 485/VIZ/2025 निर्धारण वर्ा/Assessment Year:2019-20) GANESWARA RAO ADAPA ITO 2-102 KOTTURU, VADDADI ITO WARD 1, ANAKAPALLI BUTCHAYYAPETA, VISAKHAPATNAM-531001, Vs. VISAKHAPATNAM 531026, ANDHRA PRADESH VISAKHAPATNAM-531026, ANDHRA PRADESH अपीलधर्थीAppellant प्रत्यथी Respondent

Permanent Account Number of ASFPA5432P Assessee:

अपीलधर्थी द्वारा/Appellant represented by: Shri KSS Sarma, CA (HYBRID) प्रत्यथी द्वारा/Respondent represented by: Sri Gunnu Sudhir, Sr AR सुनवाई की तारीख/Date of conclusion of hearing: 16-Jun-2026 घोषणा की तारीख/Date of pronouncement: 10-Jul-2026 आदेश / ORDER PER SHRI OMKARESHWAR CHIDARA, HON’BLE AM : This appeal is filed by the Assessee against the order of Commissioner of Income Tax(Appeals) [“Ld.CIT(A)”], National Faceless Appeal Centre (“NFAC”), Delhi vide DIN: ITBA/NFAC/S/250/2025- 26/1076503979(1) dated 28.05.2025 arising out of order passed by the Ld.AO u/s 147 r.w.s. 144 of the Income Tax Act, 1961 (“the Act”) for the Assessment Year 2019-20.

2.

Before going into the merits of the case, it is observed that the appellant filed an appeal with a delay of 16 days and the reason given is that the appeal papers were given to Chartered Accountant to file an appeal and hence requested the Bench to condone this small delay 16 days in filing the appeal before the ITAT. During the appeal proceedings, the Ld.AR of the appellant has stated that the appeal order was digitally signed on 31.05.2025, but the same was received on 02.06.2025. Moreover, the Ld.AR of the appellant has filed a letter stating that he was not well for almost two weeks and hence, there is delay in filing of appeal, which may be condoned. As the delay is very minimal and in view of the reasons mentioned by the Ld.AR of the appellant, the delay is condoned and the case is being adjudicated on merits.

3.

In this appeal, the following 3 grounds of appeal were raised and the same are to be adjudicated :

1.

The order of CIT (Appeals) NFAC is arbitrary and unjust. 2. The Honourable CIT(A) NFAC is not justified in confirming the AO order of the income @8% on 1,67,23,961 total credits in A/c no 00000033053189046 at State Bank of India, when the Jurisdictional AO for AY 2017-18 assessed @3% after enquiring from the market. Page 3 of assessment order for AY 2017-18 the AO Anakapalle estimated the profit @3%. 3. The Honourable CIT(A) NFAC is not justified in confirming INR 70,000 in A/c no.00000030765258855 at State Bank of India, U/s 69A of the income tax when the total deposits were estimated. No further addition is called for. 4. The Honourable CIT(A) NFAC is not justified separately add INR 1,16,397 in A/c no 00000030765258855 at State Bank of India, as income under head salary as there is no employer and employee relationship and it is only business receipts. 5. The appellant craves leave to add to, amend, alter, delete all or any of the above grounds of appeal. 4. During the appeal proceedings before the Bench, the Ld.AR of appellant has filed a paper book, which contains an additional ground of appeal stating that assessment notice should have been by Faceless Assessing Officer and not by Jurisdictional Assessing Officer. But this ground was neither filed as per procedure with petition nor was argued by the Ld.AR of appellant and hence the same is not adjudicated.

5.

Ground No.1 and 5 are general in nature, which do not require any adjudication.

6.

The second ground of appeal relates to estimating the income from business @8% and the same is not justified. The assessee is engaged in trading in purchase and sale of broilers from Venkateswara Hatcheries and other companies on commission basis. It was stated that the sale proceeds of broilers were deposited into the bank account, which is reflected as cash deposits. During the year under consideration, the appellant made cash deposits of Rs.1.35 crore and the assessee was asked to file the details relating to nature of business and copy of agreement entered into by the assessee with the company etc. After obtaining the bank statement, the Ld.AO found that the total credits in the bank account comes to Rs.1.67 core and the same was treated as sales turnover of the assessee in the absence of regular books of account maintained. The Ld.AO has stated that for the A.Ys.2017-18 and 2018-19, the assessee himself declared income on estimation basis @8% under 44AD of the Act as “business income”. In view of the same, for the A.Y.2020-21 also, the income was estimated at 8% of the total turnover of Rs.1.67 crores while completing the assessment. The Ld.CIT(A) confirmed the addition made by the Ld.AO as the reasoning given by the appellant is not convincing.

6.1. Aggrieved by the order of the Ld.CIT(A) confirming the order of the Ld.AO, where the business income was estimated @8% of the total turnover. As far as this issue is concerned, the Ld.AR of the appellant has argued that there will be change in the circumstances every year and due to competition also, the same rate of profit would not be earned by the businessman. The Ld.AR of the appellant has stated that the jurisdictional AO has himself assessed the income @3% of total turnover for the A.Y.2017-18 after enquiring from the market. In proof of the same, the Ld.AR of the appellant filed a copy of scrutiny assessment order passed by the Ld.AO for the A.Y.2017-18. Thus, what was mentioned in the assessment order by the Ld.AO for the A.Y.2019-20 is incorrect to the extent that the assessee himself has admitted net profit @8% of the total turnover. As this is a commission based business and there is lot of competition in the market from unorganized players, the assessee did not get the profit @8% and that is why the Ld.AO has passed the assessment order estimating the business income @3% in his own case for the A.Y.2017-18. For the A.Y.2018-19, it appears that the assessee has admitted net profit @8% of the total turnover. Thus, the net profit will vary from year to year. In view of the same, it was requested that for the current year also, the business income may be estimated @3% as against 8% adopted by the Ld.AO, which was confirmed by the Ld.CIT(A).

6.2. The Ld.DR has argued that for the A.Y.2018-19, the assessee has admitted income of 8% on the total turnover and hence the Ld.AO is correct in adopting the income @8% for the A.Y.2019-20 also.

6.3. After hearing both sides, the Bench decides to take a lenient view as the businessman is a small trader and there is no dispute with regard to the total turnover and also the fact remains that books of account were not maintained. For the A.Y.2017-18, the Ld.AO has adopted net profit @3% and for A.Y.2018-19, the assessee himself has estimated the profit @8% on the total turnover. After taking into consideration the arguments of both sides and based on the material available in the paper book submitted by the Ld.AR of the appellant, the Bench decides to adopt a profit percentage of 5% and the Ld.AO is directed to apply 5% rate as net profit on the total turnover.

7.

The third ground of appeal relates to addition of Rs.70,000/-. From the assessment order, it is observed that the assessee has made cash deposit of Rs.70,000/- in State Bank of India and the appellant did not give any explanation with regard to source of this cash deposit of Rs.70,000/- and hence the addition was made by the Ld.AO. From the assessment order, it is also observed that almost six opportunities were given to the assessee to explain all the issues, which were mentioned in the show cause notice and 142(1) notice. There was no response from the assessee on any of the issues mentioned in the notice u/s 142(1) and hence, the Ld.AO proceeded with completing the assessment u/s 144 of the Act. As mentioned above, the appellant has not given any source for the cash deposit of Rs.70,000/- in State Bank of India and the same was treated as unexplained income u/s 69A of the Act and the same was added to the total income while completing the scrutiny assessment.

7.1. This is the second ground of appeal before the CIT(A) and from the order of the Ld.CIT(A), it is observed that the assessee has not furnished any submissions even though various grounds of appeal were taken before him. It was observed by the Ld.CIT(A) that on none of the occasions, the appellant chose to file written submission or file any documents or evidences or even requested for adjournment. The Ld.CIT(A) has also noted that in the Faceless Appeal environment, all the notices issued to the appellant to the e-mail address provided by him and all the submissions are supposed to be filed online through appeal module available to the appellant online in his e-filing portal. In this electronic communication environment, e-mails/notices/letters are routed through NFAC and the appellant was expected to respond through mail. As there is no compliance to the 4 notices issued by the Ld.CIT(A)/NFAC, the appeal was dismissed.

7.2. Before ITAT, the appellant has taken a ground that the Ld.CIT(A)/NFAC is not justified in confirming the addition of Rs.70,000/- u/s 69A of the Act, when the net profit was admitted on the total credits and hence, no further addition is called for.

7.3. The Ld.DR relied on the orders of the lower authorities and stated that since there is no compliance to the notices issued by the Ld.AO/CIT(A), addition made by the Ld.AO should be sustained.

7.4. After hearing both the sides and perusing the material available on record, the Bench decides to delete the addition, because, when the Revenue has already estimated income on the total turnover, then a separate addition with respect to cash deposit cannot be made. There is no dispute that this amount of Rs.70,000/- was already considered while estimating net profit. Hence, this addition of Rs.70,000/- is deleted.

8.

The third addition made by the Ld.AO relates to salary receipt of Rs.1,16,397/-, which was credited in the savings bank account. The Ld.AO has stated that from the bank account statement, it is observed that the assessee has received salary of Rs.1,16,397/- with the narration of “bulk posting by salary”. There is no response from the assessee at the time of assessment as mentioned above and hence, the assessment was completed u/s 144 of the Act.

8.1. Before the Ld.CIT(A), there is no compliance to the notices issued. When there was no explanation to the addition made with regard to the salary, the addition made by the Ld.AO was confirmed by the First Appellate Authority also.

8.2. Before the ITAT, the Ld.AR of the appellant has stated that since there is no relationship of employer and employee between the company and the assessee, the same should not be taken under the head “salary” and the same has to be treated as business receipt.

8.3. The Ld.DR relied on the orders of the lower authorities.

8.4. Heard both the parties. The Bench observed that though the Ld.AR of appellant contended that the amount considered as “salary” should be treated as “business receipt”, he could not give any explanation as to why the amount was treated as salary in the bank account statement. Since there is no explanation with regard to the amount received as salary either before the Ld.AO/Ld.CIT(A) even before the Bench, the addition made by the Ld.AO is upheld. But, if this amount is taken as part of total turnover while estimating the net profit, then this amount of Rs.1,16,397/- may be excluded from the total turnover while computing the net profit. Since this amount is treated as salary, the statutory benefits like standard deduction etc. may be allowed to the assessee.

9.

In the result, appeal of the assessee is allowed for statistical purpose. Order pronounced under rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1962 by placing the details on the notice board on 10th July, 2026.

Sd/- Sd/- (उदयन दास गुप्ता) (ओम्कारेश्िर धिदारा) (UDAYAN DAS GUPTA) (OMKARESHWAR CHIDARA) न्याययक सदस्य/JUDICIAL MEMBER ऱेखा सदस्य/ACCOUNTANT MEMBER Visakhapatnam dated 10.07.2026. L.Rama/Sr.PS Copy to: SHRI GANESWARA RAO ADAPA, 2-102 KOTTURU, VADDADI BUTCHAYYAPETA, 1 VISAKHAPATNAM 531026, VISAKHAPATNAM-531026, ANDHRA PRADESH THE ITO, WARD 1, ANAKAPALLI, 2 VISAKHAPATNAM-531001, ANDHRA PRADESH 3 THE PCIT, VISAKHAPATNAM 4 THE D.R., ITAT, VISAKHAPATNAM BENCH 5 GUARD FILE

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