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Facts
The assessee, an individual engaged in trading edible oil, made a large cash deposit in their bank account during AY 2015-16. The case was reopened as the assessee had not filed a return of income. The Assessing Officer (AO) made an addition on account of the difference between sales and purchase value.
Held
The Tribunal noted that the assessee had not filed their return of income. While the CIT(A) allowed VAT expenditure, the Tribunal found it appropriate to estimate the income based on turnover, sales commission, and handling charges, considering the business activities undertaken.
Key Issues
Whether the addition made by the AO, considering the difference in sales and purchase value, is sustainable when the assessee has not filed a return of income? Can income be estimated based on turnover and other income sources?
Sections Cited
147, 139(1), 142(1)
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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI S.S. VISWANETHRA RAVI & SHRI S. R. RAGHUNATHA
आदेश /O R D E R
PER S. R. RAGHUNATHA, AM :
This appeal by the assessee is filed against the order of the Commissioner of Income Tax, NFAC, Delhi for the assessment year 2012-13, dated 18.12.2024.
The brief facts of the case are that the assessee is an individual engaged proprietary concern M/s.Sri Padmanaban Traders at Puduchhery and is a dealer in edible oil. As per the information available on records of the department the assessee had made a cash deposit of Rs.5,85,58,767/- in his bank account maintained with Tamilnadu Mercantile Bank ltd during the A.Y. 2015-16. The also :-2-: ITA. No:469/Chny/2025 maintained bank account at Kotak Mahindra Bank and made certain cash deposit in that account also.
The case was reopened for assessment by issuing statutory notices. The assessee was asked to explain the source of cash deposit and accordingly the assessee filed his reply on 22.12.2022 and stated that the cash deposits are made out of the cash sales by the assessee and furnished the copy of Profit and loss account, Balance sheet and copy of the VAT assessment order in support of his business activity. On perusal of the financials and documents submitted by the assessee AO noted that the assessee has made a turnover of Rs.25,43,73,026/- against a purchase of Rs.25,05,66,784/-. The assessee also has paid a net VAT of Rs.20,20,792/- after claiming an Input Tax Credit of Rs.5,22,938/-. Since, the assessee had not filed his return of income neither u/s.139(1) or 142(1) of the Act, the AO concluded the assessment by making an addition of Rs.38,06,242/- being the difference in sales and purchase value as income of the assessee and passed an order dated 22.03.2023 u/s.147 of the Act. Aggrieved by the order of the Assessing Officer, the assessee preferred an appeal before the ld.CIT(A), NFAC, Delhi.
Before the ld.CIT(A) the assessee submitted that no business can be run without spending an expenditure. Hence, the order of the AO is erroneous and prayed for allowing the expenditure claimed as per the profit and loss account filed before the AO and compute the income as per the net profit shown of Rs.4,96,902/-. On perusal of the submissions and the order of the AO, the ld.CIT(A) allowed the expenditure of VAT paid to the tune of Rs.20,20,792/- and reduced the additions accordingly by passing an order dated 17.12.2024.
:-3-: ITA. No:469/Chny/2025 5. Aggrieved by the order of the ld.CIT(A), the assessee preferred an appeal before us.
The ld.AR of the assessee submitted that both AO and ld.CIT(A) have erred in not allowing the expenditure spent by the assessee in carrying the business. The ld.CIT(A) has considered the submission and allowed the VAT paid to the department alone as an expenditure which is not tenable in law. In support of the claim of the expenditure of the business, the ld.AR submitted the paper book of 128 pages consisting of VAT order passed by the VAT department, reply filed by the assessee before the AO, Balance sheet, Profit and loss account, Purchase ledger, consignment notes issued by the Guru Traders to the assessee to show the consignment sales made, statement of bank accounts, ledger account of the Guru traders, Consignment sales patti issued by the assessee, ledger of consignment sales, Form F filed by the assessee under the CST Act for the F.Y. 2014-15 to show the consignment movement of stock. Further the ld.AR took us through the profit and loss account (paper book page No.20) and shown that the sales of the assessee were Rs.5,33,39,716/- and also has earned a sales commission of Rs.2,52,000/- from the consignment sales apart from earning goods handling charges of Rs.1,68,000/-. Further, the ld.AR stated that the assessee has earned a gross profit of Rs.14,65,887/- and a net profit of Rs.4,96,902/-. In view of the above submissions the ld.AR prayed for setting aside the order of the ld.CIT(A) in the interest natural justice and restrict the addition to the extent of net profit shown of Rs.4,96,902/-.
Per contra, the ld.DR relied on the order of AO and that of ld.CIT(A) and prayed for confirming the order of the ld.CIT(A).
:-4-: ITA. No:469/Chny/2025 8. We have heard rival contentions perused the material available on record and gone through the orders of the lower authorities. Admittedly the assessee had not filed the return of income for the impugned A.Y. 2015-16. However, the department issued notice for reopening the assessment based on the huge cash deposit made in the bank account to the tune of Rs.5.85 crores. During the assessment proceedings the assessee had furnished the balance sheet, profit and loss account, bank statement, purchase, sales and also explained the consignment sales made on commission basis along with the supporting documents. Since, the assessee had not filed his return of income neither u/s.139(1) or 142(1) of the Act, the AO concluded the assessment by making an addition of Rs.38,06,242/- being the difference in sales and purchase value as income of the assessee. We note that the ld.CIT(A) allowed the expenditure of VAT paid to the tune of Rs.20,20,792/- and sustained the balance addition of Rs.17,85,450/-. On perusal of the profit and loss account filed by the assessee, the net profit shown is Rs.4,96,902/-. However, we note that during the impugned A.Y. 2015-16 the assessee has carried out a turnover of Rs.5,33,39,716/- and also has earned a sales commission of Rs.2,52,000/- from the consignment sales apart from earning goods handling charges of Rs.1,68,000/-.
Therefore, in the present facts and circumstances of the case and to meet the ends of justice and to put the end to the litigation, we are deeming it fit to estimate the income of the assessee detailed below: - Net profit of 1% on turnover of Rs.5,33,39,716/- Rs.5,33,397/- - sales commission of Rs.2,52,000/- - 50% as income Rs.1,26,000/- - handling charges of Rs.1,68,000/- - 50% as income Rs. 84,000/- Total Rs.7,43,397/-
:-5-: ITA. No:469/Chny/2025 10. In view of the above, we set aside the order of the ld.CIT(A) and direct AO to recompute the income of the assessee as per the addition sustained to the extent of Rs.7,43,397/- as business income.
In the result, appeal filed by the assessee is partly allowed.
Order pronounced in the court on 10th July, 2025 at Chennai.