JITANSHU GOSWAMI,BANKURA vs. I.T.O., WARD - 3(1), BANKURA

Brief facts of the case are that the assessee is an individual who is dealing in trading of agricultural products. The Assessing Officer (hereinafter referred to as Ld. 'AO') noted that the assessee had filed the return of income and was showing gross turnover of ₹3,50,68,790/- on which net profit of ₹4,55,190/- i.e. 1.297% of gross turnover was shown which was very low. The assessee was also found to have made deposits in Specified Bank Notes (SBNs) during 10.11.2016 to 30.12.2016 for a sum of ₹6,34,000/-. Since the assessee did not produce the books of account and cash books to explain the income declared in the return at ₹4,99,260/-, the Ld. AO estimated the business income @8% of the turnover, which worked out to ₹28,05,503/- and since the assessee had disclosed the net profit of ₹4,55,190/-, the difference of ₹23,50,313/- was added to the total income of the assessee. Another sum of ₹6,34,000/- was also added u/s 69A of the Act and the total income was assessed at ₹35,04,800/-. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A), who partly allowed the appeal by deleting the addition of ₹6,34,000/- u/s 69A of the Act but confirmed the addition of ₹23,50,313/- by invoking the presumptive taxation provision of section 44AD of the Act.

Aggrieved with the order of the Ld. Addl/JCIT(A), the assessee has filed the appeal before the Tribunal.

Rival contentions were heard and the submissions made have been examined. Our attention was drawn by the Ld. AR to page 2 of the assessment order in which the profit has been estimated. It was stated that the turnover was ₹3,50,68,790/- and the net profit @8% was ITA No(s). 2714/KOL/2025 Assessment Year(s) 2017-18 estimated, which was sustained by the Ld. Addl/JCIT(A). It was further stated that the appeal was filed on 07.01.2020 while the order was issued on 23.09.2025 i.e. after more than 5 years of filing of the appeal. It was stated that in the business of trading of agricultural products, the profit was uncertain. The Ld. AR was fair enough to admit that the books of account and cash book were not filed before the Ld. AO. The assessee is stated to be 45 years old and in the preceding years net profit rate of about 2% was shown and it was submitted that the net profit rate applied during the current assessment year is excessive. However, when enquired by the Bench as to whether the case was scrutinized in earlier assessment years, the Ld. AR stated in the negative.

The Ld. DR vehemently argued and requested that the order of the Ld. Addl/JCIT(A) may be confirmed.

We have heard the rival contentions and perused the records placed before us. Although the Ld. AO has not invoked the provisions of section 44AD of the Act in the assessment order, but he rejected the profit shown as the notices u/s 133(6) of the Act were not complied with nor any books of account were produced and there was deposit of SBNs during the demonetization period. The Ld. Addl/JCIT(A) however, has confirmed the part of the addition by mentioning the presumptive provisions of section 44AD of the Act and the same according to him being reasonable and justified. However, a perusal of the provisions of section 44AD of the Act as applicable for AY 2017-18 shows that section 44AD of the Act is applicable only if the turnover of the business is ₹1 Crore which was increased to ₹2 Crore with effect from 01.04.2017. Since the assessee’s turnover had exceeded ₹2 Crore during the year, therefore, the provisions of section 44AD of the Act are not applicable. The Bench was of the view that no reason has been given for application of 8% of net profit rate by the Ld. CIT(A) and the same was also found to be excessive considering the overall business and the turnover of the assessee as also the past history of the case. However, on facts, the profit shown could also not be accepted; therefore, it was conveyed to the Ld. AR that the application of the net profit rate of 4% would be reasonable, to which he was agreeable. Hence, as on facts of the case, the assessee could not produce the books of account before the Ld. AO, there was justification for rejection of the book result and application of a higher rate of net profit. Considering the facts of the case, the past history of the assessee and the nature of business, the net profit rate of 4% is found to be reasonable, which is applied on the total turnover shown at ₹3,50,68,790/- and which works out to ₹14,02,752/-. Since the net profit declared by the assessee is ₹4,55,190/-, the addition of ₹9,47,562/- only is sustained and the rest of the addition made is hereby deleted. Hence, Ground Nos. 1 and 2 are partly allowed, Ground No. 3 is dismissed while Ground No. 4 is general in nature and does not require any separate adjudication.

In the result, the appeal filed by the assessee is partly allowed. Order pronounced in the open Court on 5th May, 2026. [Sonjoy Sarma] [Rakesh Mishra] Judicial Member Accountant Member Dated: 05.05.2026 Bidhan (Sr. P.S.)

Addl/JCIT(A)-Panchkula.

CIT-

CIT(DR), Kolkata Benches, Kolkata.

Guard File. //// By order