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

ITA 177/CTK/2026Status: DisposedITAT Allahabad30 September 2026AY 2017-184 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal found no basis for estimating the profit at 20% of the turnover, deeming it arbitrary. Similarly, the Tribunal found no justification for considering the Rs. 98,000/- as unexplained, given the explanation provided by the assessee. Considering the nature of the business, turnover, and the specific 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 both the reported business turnover of Rs. 85,42,021/- and the cash deposit of Rs. 98,000/-, which was to be considered as part of the business proceeds. Consequently, the order of the Ld. CIT(A) was set aside, and the Assessing Officer was directed to re-compute the income based on this 8% profit estimation. 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 of the Income Tax Act, 1961, based on information regarding 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 reported net profit of Rs. 6,31,489/-. The AO found the assessee failed to substantiate expenses, leading to an estimated profit addition of Rs. 10,76,915/- (calculated as 20% of turnover minus reported profit). Additionally, a cash deposit of Rs. 98,000/- was added under Section 69A. Both additions were upheld by the Ld. CIT(A).

What were the issues?

1. Whether the estimation of 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 (spare parts) and the submission of relevant business details? (Mixed question of law and fact) 2. Whether the addition of Rs. 98,000/- as unexplained cash deposit under Section 69A of the Act is justified, ignoring the assessee's explanation that it represents past savings and business proceeds? (Mixed question of law and fact) Assessee's Contentions: - The impugned additions are arbitrary and disregard the assessee's submissions. - The AO's estimation of profit at 20% of turnover is unrealistic for the 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. - The assessee, an ex-army man, submitted all relevant business details. Revenue's Contentions: - The additions are justified because the assessee did not file a return of income initially. - 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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