VENKATRAMUDU DOMDE,MAHBUBNAGAR vs. ITO., WARD-1, MAHBUBNAGAR

At the outset, there is a delay of 171 days in filing the captioned appeal before the Tribunal. The assessee has filed an affidavit explaining the reasons for such delay. It is submitted that the order of the Ld. Commissioner of Income Tax (Appeals), NFAC, New Delhi, was served on the assessee on 24.12.2024, and the appeal was required to be filed on or before 24.02.2025. However, the appeal came to be filed only on 18.08.2025, resulting in a delay of 171 days. The assessee, being an agriculturist residing in a village in Jogulamba District, had earlier carried on liquor business for a brief period from 01.10.2017 to 30.09.2019, after which he discontinued the business and reverted to agricultural activities. It is further stated that after closure of the business, the assessee had no active involvement in any business or tax matters. The assessee submitted that he had entrusted the matter to a tax consultant who was handling the appeal proceedings and related communications. However, the assessee was not aware of the notices issued or the subsequent dismissal of the appeal by the Ld. CIT(A). It was only upon receipt of demand from the tax authorities that the assessee came to know about the dismissal of the appeal. Thereafter, he immediately contacted a Chartered Accountant and filed the present appeal before the Tribunal. Accordingly, the delay of 171 days occurred in filing the appeal.

The assessee further submitted that the delay in filing the appeal was neither intentional nor due to negligence, but was on account of bona fide reasons, including lack of knowledge of the appellate proceedings and reliance on the tax consultant. It is contended that there was no malafide intention in not filing the appeal within the prescribed time, and therefore, prayed that the delay be condoned in the interest of justice.

The learned Senior A.R., for the Revenue, Ms. Helen Ruby Jesindha, on the other hand, opposed the petition for condonation of delay and submitted that the assessee has failed to demonstrate ‘sufficient cause’ for such a substantial delay, and therefore, the delay should not be condoned.

I have heard both the parties and perused the petition along with the affidavit filed by the assessee seeking condonation of delay of 171 days in filing the appeal before the Tribunal. I find that the reasons explained by the assessee appear to be bona fide and constitute a reasonable cause for the delay. I further note that the Hon’ble Supreme Court in the case of Collector, Land Considering the facts and circumstances of the case and the principles laid down by the Hon’ble Supreme Court, I am inclined to condone the delay of 171 days in filing the appeal subject to payment of costs of Rs. 2,000/- (Rupees Two Thousand only) to the Prime Minister National Relief Fund and further, the assessee is directed to produce proof of such payment either before the Registry or the Assessing Officer within 15 days from the date of this order. Subject to the above condition, the delay is condoned and the appeal is admitted for adjudication.

The brief facts of the case are that, the assessee is an individual and has not filed return of income for the assessment year under consideration. Based on information available with the department, the case was reopened under Section 147 of the Income-tax Act, 1961 and notice under Section 148 was issued and served on the assessee. Subsequently, notices under Section 142(1) were also issued calling for details; however, the assessee did not respond to any of the notices nor furnished any explanation during the course of assessment proceedings (as evident from the assessment order ). On verification of information available on record, the A.O. noticed that the assessee had undertaken high value financial transactions including cash deposits of Rs. 8,86,91,820/- in bank account and purchase of alcoholic liquor amounting to Rs. 5,17,45,891/- during the relevant financial year. The A.O. called upon the assessee to explain the nature and source of such transactions; however, no response was furnished by the assessee.

The A.O., after considering the material available on record, observed that the assessee is engaged in the business of trading in alcoholic liquor and in the absence of any books of accounts or details from the assessee, estimated the sales at Rs. 5,58,85,562/- being 108% of purchases. Thereafter, the A.O. estimated income at 8% of such turnover and determined taxable income at Rs. 44,70,845/-. Since the assessee failed to furnish any explanation or comply with statutory notices, the assessment was completed under Section 147 r.w.s. 144 of the Act by determining total income at Rs. 44,70,845/- (as detailed in para 4.1 of the assessment order ).

Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee was provided with several opportunities to present his case and furnish necessary details and evidences. The assessee filed certain submissions explaining that he is engaged in liquor business and contested the estimation of income; however, the assessee could not furnish complete books of accounts or supporting documentary evidences to substantiate his claim.

The Ld. CIT(A), after considering the submissions of the assessee and perusing the material available on record, observed that, the assessee had failed to file return of income and also failed to comply with notices during assessment proceedings. It was further observed that the A.O. has estimated income based on material available on record due to non-cooperation of the assessee. In the absence of any credible evidence to rebut the findings of the A.O., the Ld. CIT(A) held that the estimation of income at 8% of turnover is reasonable and accordingly upheld the addition made by the A.O. Thus, the appeal filed by the assessee was dismissed.

Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before the Tribunal.

The learned counsel for the assessee, Shri A. Srinivas, C.A. submitted that……. the Ld. CIT(A) erred in dismissing the appeal ex- parte without considering the facts and circumstances under which the assessee could not appear before the appellate authority. The learned counsel further submitted that the assessee was almost closed its business activities and there was no proper person to look after accounting and taxation matters and due to the negligence of the authorised representative, necessary details could not be furnished before the Ld. CIT(A). The learned counsel further submitted that, the cash deposits made during the demonetisation period were out of regular business receipts of the assessee and the same are duly recorded in the books of accounts. It was further submitted that the assessee has now furnished relevant evidences including cash book and month-wise details of cash deposits to substantiate its claim and to explain the source of cash deposits and such evidences were not placed before the A.O. during assessment proceedings. Therefore, the learned counsel requested that one more opportunity may be granted to the assessee to present its case and the issue may be restored to the file of the A.O. for fresh adjudication.

The learned Senior A.R. for the Revenue, Ms. Helen Ruby Jesindha, on the other hand, submitted that, the assessee has failed to comply with various notices issued by the A.O. during assessment proceedings as well as notices issued by the Ld. CIT(A) during appellate proceedings and has not furnished any explanation or supporting evidences to justify the cash deposits made during the demonetisation period. The learned Senior A.R. further submitted that, the A.O. has rightly treated the cash deposits as unexplained money under Section 69A of the Act, in the absence of satisfactory explanation from the assessee.

I have heard both sides, perused the material available on record, and had gone through the orders of the authorities below. Admittedly, the assessee has not filed any return of income for the assessment year under consideration. During the course of assessment proceedings, the A.O. noticed that the assessee has made huge cash deposits of Rs. 8,86,91,820/- in an Andhra Bank account. The A.O. further noted that the assessee has TCS transactions with CSBCL, Mahbubnagar, for an amount of Rs. 5,17,45,891/-. The A.O. called upon the assessee to explain the source of cash deposits into the bank account and also the nature of TCS collected by CSBCL, Mahbubnagar Depot. The assessee neither responded to the notices nor explained the source for cash deposits and other transactions. Therefore, the A.O. passed a best judgment assessment order under Section 144 of the Act, 1961. After considering the relevant details of returns of income filed by the assessee for A.Y. 2019–20 onwards, the A.O. noticed that the assessee is engaged in the business of alcohol and liquor in the name of Sri Lakshmi Venkateshwara Wines. The A.O. observed that during the year under consideration, the assessee has purchased alcohol and liquor to the extent of Rs. 5,17,45,891 and, thus, taking into account the purchases and the TCS amount, arrived at a turnover of Rs. 5,58,85,552. The A.O. estimated net profit at 8% on the said turnover and determined the total income at Rs. 44,70,845/-. The learned counsel for the assessee restricted his arguments to the estimation of net profit by the A.O., in light of certain decisions of the ITAT Hyderabad Benches, and pleaded to restrict the estimation of net profit to 3%, as in similar circumstances the Tribunal had estimated net profit at 3% of the total turnover.

I find that the assessee is engaged in the business of trading in alcoholic beverages, including IMFL and beer. Although the assessee has carried on trading with huge turnover, she has not furnished any return of income and also failed to file relevant documents to justify the financial results. Since the assessee is a non-filer and has not filed any evidence to justify the financial results, in our considered view, the only option left with the A.O. is to estimate net profit on total turnover based on the material available on record. The A.O. has adopted 8% net profit, taking into account the non- filing status of the assessee and non-submission of any evidence. The Ld. AR relied upon the decision of the Hon’ble Karnataka High Court in ITA No. 815 of 2011 and ITA No. 2096 of 2017, wherein the Tribunal has considered a similar issue and estimated net profit at 3% of the gross turnover. Although the assessee has relied upon two cases of similar nature, in our considered opinion, there is no hard and fast rule for estimation of net profit in all cases, as it depends upon the facts of each case and the relevant evidences submitted by the assessee. Therefore, the case laws relied upon by the Ld. AR cannot be taken as a straightjacket formula for estimation of net profit in the present case. Since the A.O. has also not brought on record any proper justification for estimation of 8% net profit on total turnover, and the assessee has also failed to establish as to how 3% is justified, in our considered view, a middle path should be adopted to meet the ends of justice. Accordingly, I direct the A.O. to estimate net profit at 5% on the total turnover determined and compute the income under the head “Profits and gains of business or profession.”

In the result, the appeal of the assessee is partly allowed.

The Principal Commissioner of Income Tax, Hyderabad. 4. नवभधगीयप्रनतनिनर्, आयकर अपीलीय अनर्करण, हैदरधबधद / DR, ITAT, Hyderabad 5. गधर्ाफ़धईल / Guard file