RACHAM REDDY CHANDRA SEKHAR REDDY ,ANANTAPUR vs. INCOME TAX OFFICER, WARD-2, ANANTAPUR

Brief facts of the case are that the assessee, an individual, deriving income from retail trade of cement and paints, filed his return of income for the AY 2015-16 on 28.03.2017 duly admitting income of Rs.2,80,000/-. During assessment proceedings u/s 143(3) of the Act , the assessee was asked to file certain details with regard to cash deposits. However, the assessee did not file the relevant details and, therefore, the AO treated the cash deposits to the tune of Rs.1,92,50,900/- as the turnover of the assessee and estimated the profit @ 8% which worked out to Rs.15,40,072/-. Aggrieved, the assessee preferred an appeal before the CIT(A), who confirmed the order of AO and the assessee is in second appeal before the Tribunal.

The Ld.Counsel for the assessee submitted that the business was initially carried on by assessee’s wife who expired on 30.11.2013 and it took some time for assessee to obtain license in his name and, therefore, he had made deposits of the turnover into his bank account till such period. He, therefore, claimed that cash deposits are nothing but turnover of business of assessee. Further, he submitted that in the cement business, the net of profit can only be 1 to 2% as held by the Tribunal in similar cases and assessee had also reported 1% of the total turnover of the assessee in earlier as well as the relevant A.Y. He prayed that similar direction of estimating income of net profit at 1.5% of the total turnover be given to the assessee. He also filed copies of returns of income filed by assessee’s wife for earlier AYs wherein income was offered at 1% of the total turnover. 4. Ld.DR however, opposed the estimation of income at 1.5% as claimed by the assessee. 5. Having regard to nature of business carried on by the assessee and particularly assessee’s wife and also having regard to the fact that she had allegedly offered income at 1% of the total turnover in earlier AYs which has been accepted by the department, I am of the opinion that the income can be estimated at 1.5% of the total turnover as held by me in the case of Sri Damerla Pitchaiah in ITA no.447/Hyd/2016 for AY 2011-12 order dt. 30.11.2016. However, only for the purpose of verification about the rate at which income has been offered by the assessee in the earlier years, the assessment is set aside to the file of the A.O. and if the net income offered by the assessee in the earlier A.Ys was more than 1% of the total turnover, only then, the income in the relevant A.Y. shall also be estimated at such higher rate. 6. In the result, assessee’s appeal is allowed. Order pronounced in Open Court on 11th November, 2019.