DEBARAJ SAHOO,GANJAM vs. THE INCOME TAX OFFICER, WARD-1, BERHAMPUR, BERHAMPUR

ITA 177/CTK/2026Status: DisposedITAT Cuttack30 September 2026AY 2017-184 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal found no basis to estimate the profit at 20% of the turnover. It also found no basis to consider the Rs. 98,000/- as unexplained, disregarding the assessee's explanation. Considering the nature of the business, turnover, and the facts of the case, the Tribunal deemed it reasonable to estimate the assessee's income on a profit of 8% of the total turnover. This total turnover was to include Rs. 85,42,021/- plus Rs. 98,000/-, treating the latter as part of business proceeds. Consequently, the order of the Ld. CIT(A) was set aside, and the AO was directed to re-compute the income accordingly. The principle derived is that profit estimation must be reasonable and supported by evidence, and explanations for deposits should be considered. The Tribunal did not expressly leave any issue undecided.

What were the facts?

The assessee, Debaraj Sahoo, is appealing an order from the NFAC, Delhi, dated December 19, 2025, concerning Assessment Year 2017-18. The Assessing Officer (AO) initiated proceedings under Section 148 due to substantial credits, including cash deposits, and the assessee's failure to file a return. The assessee subsequently filed a return declaring an income of Rs. 10,51,336/-. During assessment, the AO noted a total turnover of Rs. 85,42,021/- with a gross profit of Rs. 7,68,782/- and net profit of Rs. 6,31,489/-. The AO found the assessee failed to substantiate expenses and estimated profit at 20% of turnover, leading to an addition of Rs. 10,76,915/-. Additionally, a cash deposit of Rs. 98,000/- in another bank account was added under Section 69A. Both additions were upheld by the Ld. CIT(A). The assessee has appealed these additions.

What were the issues?

1. Whether the addition of Rs. 10,76,915/- made by estimating the profit at 20% of the turnover is arbitrary and contrary to Section 44AD of the Income Tax Act, 1961, considering the nature of the assessee's business as an ex-army man running a spare parts business. 2. Whether the addition of Rs. 98,000/- under Section 69A of the Income Tax Act, 1961, is justified, ignoring the assessee's explanation that it represents past savings and business proceeds. Assessee's Contentions: The impugned additions are arbitrary and made without considering the assessee's submissions. The estimation of profit at 20% of turnover is unrealistic for a spare parts business and contrary to Section 44AD. The Rs. 98,000/- represents past savings and business proceeds, and its addition under Section 69A is unjustified. Revenue's Contentions: The additions are justified because the assessee did not file his return of income. The decision of the Ld. CIT(A) should be upheld.

Which sections of the Income-tax Act were involved?

Section 148,Section 69A,Section 44AD,Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, CUTTACK “SMC” BENCH

Before: SHRI GEORGE MATHAN & SHRI GOPALAN GURUSAMY

For Appellant: Shri P.K. Mishra and Shri Prasanta
For Respondent: Shri Vijay Singh, Sr. DR
Hearing: 29.09.2026Pronounced: 30.09.2026

PER GOPALAN GURUSAMY, ACCOUNTANT MEMBER:

This Appeal is filed by the Assessee against the order of the NFAC, Delhi (‘Ld. CIT(A)’ for short) dated 19.12.2025, passed u/s 250 of the Income Tax Act, 1961 (“the Act”, for short) pertaining to the Assessment Year 2017-18 (Appeal No. NFAC/2016-17/10434518).

2.

The brief facts are that the Assessing officer based on information that there were substantial credits including cash deposits in the bank account of the assessee, and that the assessee has not filed return of income for the subject year, issued notice u/s 148 of the Act. In response, the assessee had filed his return of income declaring total income of Rs.10,51,3

The order continues below.

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