INCOME TAX OFFICER, TIRUVARUR vs. BASKARAN ROHINI, MANNARGUDI

ITA 1635/CHNY/2026Status: DisposedITAT Chennai05 October 2026AY 2022-2315 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal dismissed the Revenue's appeal. On the first issue, regarding the estimation of business income, the Tribunal found the CIT(A)'s approach of restricting the net profit rate to 3% to be balanced and reasonable. The Tribunal noted that the CIT(A) considered the nature of the business, scale of operations, historical profit margins, and verification deficiencies. The Revenue failed to provide material to justify the AO's 10% estimation. Therefore, the Tribunal upheld the CIT(A)'s direction to recompute business income at 3% of gross sales. On the second issue, concerning the deletion of the addition under Section 69A, the Tribunal agreed with the CIT(A). It acknowledged that while reconciliations had inconsistencies, the deposits broadly stood linked with business receipts and cash rotation. The Tribunal reasoned that since business income was already estimated, a separate addition for cash deposits arising from the same business stream, without establishing an independent unexplained source, would lead to double taxation. The Revenue did not provide independent material to prove the deposits arose from a source other than the disclosed business. Thus, the deletion of the addition under Section 69A read with Section 115BBE was upheld.

What were the facts?

The Revenue appealed the order of the CIT(A) for Assessment Year 2022-23. The assessee, engaged in gold ornament trading, declared an income of Rs. 15,23,030. The Assessing Officer (AO) rejected the assessee's books of account under Section 145(3) due to unverifiable purchases and estimated business income at 10% of the turnover of Rs. 35,21,93,676, resulting in an addition of Rs. 3,36,96,337. The AO also added Rs. 3,81,91,674 as unexplained cash deposits under Section 69A read with Section 115BBE. The CIT(A) upheld the rejection of books but restricted the profit estimation to 3% of turnover and deleted the addition under Section 69A, holding it was subsumed in the estimated business income.

What were the issues?

1. Whether the CIT(A) erred in restricting the estimation of business income to 3% of total turnover as against 10% estimated by the AO, after upholding the rejection of books of accounts under Section 145(3) and finding that the assessee failed to furnish complete quantitative reconciliation and that purchases could not be independently verified? (Question of law and fact, turning on Section 145(3)). 2. Whether the CIT(A) erred in deleting the addition of Rs. 3,81,91,674 made under Section 69A read with Section 115BBE for unexplained cash deposits, without appreciating that the assessee failed to establish a nexus between the deposits and business activity, and that such deposits constitute a separate source of income? (Question of law and fact, turning on Section 69A and 115BBE). Assessee's contentions (as inferred from the CIT(A)'s order and the Tribunal's discussion): The assessee argued that the profit margin estimation should consider historical profit ratios (0.47% to 6.15%), the nature of business (B2B transactions forming 92.86% of turnover), and that the cash deposits were broadly linked to business receipts and cash rotation, and their profit element was subsumed in the estimated business income, thus avoiding double taxation. Revenue's contentions: The Revenue argued that after rejecting books under Section 145(3), the AO was justified in estimating profit at 10%, as the deficiencies were serious. They contended that the CIT(A) erred in restricting the profit rate to 3% merely based on the average historical margins, ignoring the volatility and verification issues. Regarding cash deposits, the Revenue argued that the assessee failed to conclusively establish the nexus with business receipts, and these deposits constituted unexplained money taxable under Section 69A.

Which sections of the Income-tax Act were involved?

Section 145(3),Section 69A,Section 115BBE,Section 250,Section 133(6)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI

Before: SHRI MANU KUMAR GIRI & SHRI S.R.RAGHUNATHA

Hearing: 15.07.2026

PER MANU KUMAR GIRI, JM:

The present appeal has been filed by the Revenue against the order of the Ld. Commissioner of Income Tax (Appeals), NFAC, Delhi [hereinafter referred to as “the ld. CIT(A)”], dated 23.01.2026, passed u/s. 250 of the Income Tax Act, 1961 (“the Act”) for Assessment Year (AY) 2022-23. ITO (Vs) Baskaran Rohini 2. The Revenue has raised the following grounds

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 145(3)

All 3,640 judgments and leading authorities on Section 145(3) →

Recent GST High Court judgments

Search GST case law →