TOHIN MUSTAFA CHAUDHARY,AKLUJ vs. ITO INCOME TAX OFFICER WARD 2, PANDHARPUR

Brief facts of the case are that the assessee is an individual and engaged in the business of commission agent for purchase and sale of Fruits and Vegetables. Return of income for A.Y 2017-18 e-filed on 30.03.2018 declaring total income of Rs.5,83,110/-. Case selected for Limited Scrutiny under CASS for the reason “huge cash deposits in bank accounts”. After validly serving statutory notices u/s143(2) and 142(1) of the Act, assessee failed to provide appropriate explanation. Ld. Assessing Officer on examination of profit and loss account, cash deposit during the demonetization period at Rs.42,06,500/- and non-compliance by the assessee concluded the proceedings by firstly estimating the net profit at Rs.10,43,150/- as against Rs.7,33,113/- disclosed by assesseee. Ld. Assessing Officer also did not allow the deduction u/s.80C of the Act at Rs. 2.00 lakhs claimed for investment in ICICI Prudential Fund. Ld. Assessing Officer further made addition for unexplained investment u/s.69A of the Act at Rs.42,06,500/-. Income assessed at Rs.52,49,650/-.

Aggrieved assessee preferred appeal before ld. CIT(A) but failed to succeed, since assessee could not provide specific stock details, details of buyers and sellers and month-wise purchase details. Aggrieved assessee is now in appeal before this Tribunal.

Ld. Counsel for the assessee vehemently argued referring to the written submissions filed before ld. CIT(A), statement of facts, details mentioned in the grounds of appeal raised before ld. CIT(A) and various judgments and decisions referred therein.

On the other hand, Ld. DR vehemently argued supporting the order of ld. CIT(A).

We have heard the rival contentions and perused the material placed before us. First issue for our consideration is the addition for unexplained investment u/s.69A of the Act at Rs.42,06,500/- for not explaining the source of such cash deposits in his bank account during the demonetization period. From perusal of the paper book filed by the assessee and also cash book placed at page 11 to 30 it indicates that during the year the total cash outflow of the assessee in the form of deposit in the bank account and expenses aggregating to Rs.2.07 crore approximately. Cash deposits are consistently being made by assessee in the preceding financial year also. Ld. Assessing Officer has not disputed the genuineness of the remaining cash deposits during non demonetization period during the year and accepted them as part of business receipts. We also note that the assessee is only showing the commission income in the profit and loss account but no other details of the gross turnover are appearing. It is also noted that in the balance sheet assesee is showing sundry creditors and sundry debtors which are higher than the gross commission receipts. This shows that the assessee is maintaining the details of gross turnover in its books but not routing it through its profit and loss account and therefore no details have been provided for stock, sales and purchases.

However, considering the fact that complete details explaining the source of alleged cash deposit were not filed before the lower authorities and before us it is claimed that the assessee is earning commission income from the transactions of purchase and sale of goods and the source of alleged deposits are the sale transactions which are duly entered in the books of account but only under the heads of respective parties for whom such transactions are carried out and the assessee only books the commission income, we therefore deem it appropriate to restore this issue to the file of ld. Jurisdictional Assessing Officer for afresh adjudication. Needless to mention that ld. JAO shall provide reasonable opportunity to the assessee to furnish the details of such transactions of cash sales utilized for making alleged cash deposits and that the assessee has offered the commission income for carrying out such sale transactions. Relevant finding of ld.CIT(A) on this issue is set aside. Ground No.2 raised by the assessee is allowed for statistical purposes.

Next issue raised in Ground No. 2 is regarding higher estimation of Net Profit at 40% of the gross commission income as against 28% declared by the assessee. We note that the assessee has shown gross commission income of Rs.26,07,877/- and Net Profit shown is Rs.7,33,113/- approximately 28.11%. However due to lack of reply by the assessee, ld. AO estimated it at 40% of the gross commission income. However, in the proceedings before First Appellate Authority, the asessee was asked to provide details of stock, party wise purchase and sale etc. However the assessee being commission agent, is not maintaining these details. It is not in dispute that the assessee is carrying similar type of business activity for past many years and 28% Net Profit offered by the assessee is already a fair Net Profit rate and there is no justification to estimate higher Net Profit to the one declared by the assessee. We therefore hold that no further estimation of Net Profit is required to be made and that the net profit declared by Rs.7,33,113/- deserves to be accepted. Accordingly, Ground No. 1 raised by the assessee is allowed.

In the result, the appeal of the assessee is partly allowed for statistical purposes.