RAMESH MUTTA,HYDERABAD vs. ITO, WARD- 10(2), HYDERABAD

ITA 330/HYD/2026Status: DisposedITAT Hyderabad23 September 2026AY 2017-1810 pages
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What did the Tribunal hold?

The Tribunal found merit in the assessee's contention that the CIT(Appeals) had not considered expenses like loading, unloading, salaries, and administrative expenses, nor had the CIT(Appeals) considered the AO's acceptance of lower income rates in the assessee's own case for the succeeding year (AY 2018-19, net profit rate of 1.76%) and in the case of the assessee's brother for the same year (AY 2017-18, net profit rate of 1.87%). While these precedents cannot be mechanically applied, they are relevant for determining a reasonable income rate. The Tribunal acknowledged that the CIT(Appeals) had accepted the assessee as a commission agent and the deposits as business turnover. However, considering the substantial volume of transactions and the lack of complete records, a reduction solely on general claims was not warranted. The Tribunal deemed it appropriate to restrict the estimation of business income to 2% of the total receipts of Rs. 5,69,58,722. The AO was directed to recompute the income accordingly. The issue regarding Section 69A and Section 115BBE was implicitly addressed by treating the income under normal provisions at a reduced rate.

What were the facts?

The assessee, Ramesh Mutta, filed his return of income for AY 2017-18 declaring an income of Rs. 6,24,215. The case was selected for limited scrutiny. During assessment proceedings, the assessee failed to respond to notices. The Assessing Officer (AO) observed cash deposits of Rs. 5,69,58,722 in the assessee's bank account. Lacking explanation, the AO treated this as undisclosed turnover and estimated income at 12%, making an addition of Rs. 68,35,046 under section 69 of the Income-tax Act, 1961, and determined total income at Rs. 74,59,261. The assessee appealed to the CIT(Appeals). The CIT(Appeals) noted the assessee acted as a commission agent for vegetable sales, receiving 4% commission. He reduced the income estimation to 4% of turnover and directed it be treated under normal provisions, not section 69. The assessee appealed to the ITAT.

What were the issues?

1. Whether the estimation of the assessee's income at 4% on turnover by the CIT(Appeals) was erroneous in facts and law, considering the nature of business and material on record? 2. Whether the CIT(Appeals) erred in estimating income at 4% without allowing expenditure incurred by the appellant? 3. Whether the CIT(Appeals) erred in restricting relief to a 4% profit estimation, when the appellant's gross commission/receipts were themselves at 4% of transactions, implying a turnover of Rs. 22,78,349 (4% of Rs. 5,69,58,722)? 4. Whether the CIT(Appeals) erred in restricting relief when the addition under Section 69A read with Section 115BBE was unsustainable? 5. Whether the CIT(Appeals) failed to appreciate that once cash deposits were accepted as business receipts, they could not be treated as unexplained money under Section 69A? Assessee's Contentions: - The CIT(Appeals) erred in estimating net commission income at 4% of total receipts. - In the case of his brother, Shri Mutta Yadgiri, for the same AY, the AO accepted returned income which worked out to 1.87% of gross receipts. - In the assessee's own case for AY 2018-19, the AO accepted commission at 4% of total receipts, with a net profit rate of 1.76% on cash deposits. - The 4% estimation is exorbitant and should be scaled down to 1-2% considering these precedents and the lack of allowance for expenses. Revenue's Contentions: - The assessee failed to substantiate with irrefutable documentary evidence that the commission income determined by the CIT(Appeals) was on the higher side. - Since the assessee failed to maintain complete records, he cannot seek a reduction based on general and unsubstantiated contentions. - The well-reasoned order of the CIT(Appeals) should be upheld.

Which sections of the Income-tax Act were involved?

Section 144,Section 143(2),Section 142(1),Section 69,Section 69A,Section 115BBE

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, HYDERABAD BENCHES, HYDERABAD

Before: SHRI RAVISH SOOD, HON’BLE & SHRI MADHUSUDAN SAWDIA, HON’BLE

PER RAVISH SOOD, JM:

The present appeal filed by the assessee is directed against the order passed by the CIT(Appeals), dated 20.11.2025, which in turn arises from the order passed by the Assessing Officer (for short, ‘AO’) under section 144 of the Income-tax Act, 1961 (for short, ‘the Act’), dated 28.12.2019 for the ITA 330/HYD/2026 RAMESH MUTTA

assessment year 2017-18. The assessee has assailed the impugned order on the following grounds of appeal before us:

“1. The learned Commissioner of Income-tax (Appea

The order continues below.

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