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Facts
The assessee, a proprietor of KVG Petroleums, filed his return of income for AY 2017-18. The AO determined the total income at Rs. 13,48,977 due to low net profit margin and added Rs. 20,15,430 on account of disproportionate cash deposits during demonetisation. The CIT(A) confirmed the AO's order.
Held
The Tribunal noted that the assessee faced adverse personal circumstances, including the death of his son and deteriorating health, which affected his ability to respond to notices and appear before the lower authorities. The Tribunal observed that the books of account were audited and no defects were pointed out.
Key Issues
Whether additions made by the AO and confirmed by the CIT(A) are sustainable on merits, especially in light of the assessee's personal adversities and audited books of account.
Sections Cited
144, 143(2)
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Income Tax Appellate Tribunal, “SMC” BENCH : BANGALORE
Before: SHRI PRASHANT MAHARISHI
This appeal is filed by Shri B.V. Yogish (the assessee/appellant) for the assessment year 2017-18 against the appellate order passed by the National Faceless Appeal Centre, Delhi (NFAC) [ld. CIT(A)] dated 02.06.2025 wherein the appeal filed by the assessee against the assessment order passed u/s. 144 of the Income-tax Act, 1961 [the Act] dated 11.10.2019 by the ITO, Ward 1, Chikmagalur, was dismissed. The assessee is aggrieved with the same and in appeal.
The brief facts of the case show that assessee is a proprietor of KVG Petroleums, filed his return of income on 31.10.2017 at a total income of Rs.5,71,310. Return was picked up for scrutiny and notice u/s. 143(2) was issued to the assessee. On verification of the audited accounts, the ld. AO noted that assessee has declared net income from business of Rs.5,71,909 on the gross turnover of Rs.13,48,93,723 which is just 0.42% of the gross turnover, whereas in the earlier period he has shown income of 1.2% of the gross turnover. During the assessment proceedings, the assessee was asked to furnish details of expenses claimed which were not furnished and therefore the AO determined the total income at Rs.13,48,977 instead of Rs.5,71,909.
The ld. AO further found cash deposit during the demonetisation period is disproportionate to his regular income. Accordingly he found that assessee has deposited Rs.31,52,530 in cash out of which the ld. AO granted a credit of Rs.11,02,100 and made an addition of balance sum of Rs.20,15,430. The total income of the assessee was assessed at Rs.30,99,407 and assessment order u/s. 144 of the Act was passed on 11.10.2019.
The assessee aggrieved with the same and preferred appeal before the ld. CIT(A) wherein 4 notices were issued on various dates which were not complied with and therefore the ld. CIT(A) confirmed the action of the AO by order dated 2.6.2025. Assessee is in appeal before me.
The ld. AR submitted that assessee is running a fuel station by name KVG Petroleums as his proprietary concern at Chikmagalur. The son
of the assessee passed away on 6.9.2018 and subsequently the health of assessee deteriorated and could not respond to notices or filed appeal in time. It was further stated that though appeal was filed late before the ld. CIT(A), but same was accepted and delay of 3 years 3 months and 5 days was condoned. He submitted that due to adverse situation, the assessee could not appear before the ld. CIT(A). In support the assessee also submitted an Affidavit along with death certificate of his son. It was further stated with respect to non-receipt of notices in Col. 17 of Form 35 assessee specifically requested the notices to be issued at the address of the assessee, but no such notice has been issued and therefore assessee could not appear before the ld. CIT(A). Thus the claim of the ld. AR is that due to ill-health and death of his son, the assessee could not make proper appearance before the ld. lower authorities which has resulted into an unreasonable addition. It was stated that even on the merits, books of account of the assessee is audited and without pointing out any defects therein, business income of the assessee was estimated. Further the sources of cash deposit in the bank account is out of regular books of account which was once again added to the total income. Therefore, even on merits, the order of the ld. lower authorities is not sustainable.
The ld. DR vehemently supported the orders of the ld. lower authorities and submitted that if the assessee does not submit any detail, there is no option available with the ld. AO or the ld. CIT(A) to decide otherwise.
I have carefully considered the rival contentions and perused the orders of the ld. lower authorities. The affidavit furnished by the assessee was also accompanied by the death certificate of son of the assessee. It is not denied that assessee is running a petrol pump by name KVG Petroleums as his proprietary concern. It is also not denied that books of account of the assessee are audited. Merely the lower Net Profit cannot be a cause of addition, unless books of account are found to be defective. The cash so deposited in the bank account are also stated to be arising out of regular sale proceeds. Therefore same cannot also be added to the total income of the assessee unless it is found that cash so deposited is unaccounted income of the assessee which is not emanating from the regular books of account. In view of the peculiar facts and adversity faced by the assessee, in the interest of justice, I remit whole appeal back to the file of the ld. AO as the assessment order is passed u/s. 144 of the Act, with a direction to the assessee to produce the relevant books of account and evidences of all expenses. The ld. AO after examining the same and also after verifying the source of cash deposit in the bank account during the demonetisation period, may decide the issue afresh, after giving opportunity of hearing to the assessee.
In the result, the appeal of the assessee is allowed as indicated above. Pronounced in the open court on this 27th day of October, 2025.