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Facts
The assessee, a firm engaged in trading of emulsions and paints, failed to file its return of income for AY 2017-18. The AO initiated proceedings under Section 148, and later assessed income by estimating it at 12% of the total turnover of Rs. 1,44,73,000/-.
Held
The Tribunal noted a disparity in the turnover figures claimed by the assessee (Rs. 72,73,074/-) and those used by the AO and FAA (Rs. 1,44,73,000/-). To resolve this discrepancy and ensure justice, the matter was restored to the AO.
Key Issues
Whether the FAA was justified in sustaining an addition of 8% of the total turnover when there was a significant dispute regarding the correct turnover figure and the evidence presented.
Sections Cited
250, 270A, 148, 147, 144, 144B, 139(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘C’ (SMC
Before: SHRI GEORGE GEORGE K
आदेश/ O R D E R
This appeal filed at the instance of the assessee is directed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 20.12.2023 passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2017-18.
There is a delay of 399 days in filing this appeal. The assessee has filed petition for condonation of delay accompanied by an affidavit by the Managing Partner of the assessee firm stating therein the reasons for belated filing of this appeal. The reasons stated in the affidavit by the Managing Partner for belated filing is that, the assessee’s firm is unaware of the appellate order being passed as there were no real time alerts. It was submitted that the assessee became aware only when penalty order u/s.270A of the Act was received by the assessee firm. Immediately appeal was filed belatedly. On perusal of the same, I find there is sufficient reason for delay in filing this appeal and I condone the delay subject to assessee’s firm paying a cost of Rs.5,000/- (Rupees Five Thousand only) to Tamil Nadu State Legal Services Authority at the Hon’ble High Court of Madras. Accordingly, the delay in filing the appeal is condoned and I proceed to dispose off the appeal on merits.
The solitary issue for my adjudication is whether the First Appellate Authority (FAA) is justified in sustaining the addition of Rs.11,57,840/- being 8% of the total cash deposits of Rs.1,44,73,000/-.
3 -: 4. Brief facts of the case are as follows: The assessee is a firm. It is engaged in the business of trading of emulsions and paints for various companies. For the assessment year 2017-18, the assessee firm had not filed the return of income. The Department was having information that assessee firm had made cash deposit into its current account amounting to Rs.1,44,73,000/- and cash withdrawals. The assessee having not filed the return of income, the AO was of the view that there is escapement of income and issued notice u/s.148 of the Act on 29.03.2021. In response to notice issued u/s.148 of the Act, the assessee filed its return on 22.02.2022 admitting loss of Rs.30,768/-. The AO completed assessment u/s.147 r.w.s. 144 r.w.s.144B of the Act vide order dated 23.03.2022 by adding a sum of Rs.17,36,760/- being 12% of the total turnover of Rs.1,44,73,000/-. The AO after examining the narration of the bank entries came to a conclusion that assessee being engaged in the business of trading of emulsions and paints and not having filed the return of income, estimated the income at 12% of the total turnover. Further, the AO held the loss returned by the assessee firm cannot be accepted since it had not filed its return of income within the time allowed u/s.139(1) of the Act.
4 -: 5. Aggrieved by the order of the AO, assessee filed appeal before the First Appellate Authority (FAA). The FAA partly allowed the appeal of the assessee. The FAA reduced the estimation to 8% instead of 12% of the total turnover estimated by the AO.
Aggrieved by the order of the FAA, the assessee has filed the present appeal before the Tribunal. The Ld.AR has filed a paper-book enclosing therein bank statements of the current account of the assessee firm, copy of VAT turnover certificate and comparable turnover, the GP rate and the net profit for the assessee from financial year 2014-15 to 2018-19. The Ld.AR by referring to the bank statements and VAT turnover submitted that the total cash deposit is only a sum of Rs.72,73,074/- and the AO by mistake had taken the turnover at Rs.1,44,73,000/-. Further, the Ld.AR submitted the gross profit declared for the current year is substantially more than the gross profit rate for the earlier years and the FAA’s adoption of net profit rate at 8% is uncalled for. The Ld.AR submitted that since relevant details regarding cash deposits being amount of Rs.72,73,074/- has not being submitted before the AO nor before the FAA, in the interest
The Ld.DR supported the orders of the AO and the CIT(A).
I have heard rival submissions and perused the material on record. The assessee had placed on record the bank statement of current account held by the assessee in Union Bank of India. It is the claim of the Ld.AR that the assessee firm had made cash deposit only for a sum of Rs.72,73,074/-. The AO and the FAA had taken the cash deposits at Rs.1,44,73,000/-. The assessee has also placed on record the VAT turnover declaration certificate which evidences turnover of the assessee firm at Rs.72,73,074/-. In light of the disparity of the turnover adopted by the Income- tax Authorities and the claim of assessee, I deem it appropriate to restore the matter to the files of the AO. The AO is directed to decide the contention of the assessee and take decision in the matter subject to the assessee producing the proof of payment of cost of Rs.5,000/- paid to Tamil Nadu State Legal Services Authority at the Hon’ble High Court of Madras. It is ordered accordingly.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 1st July, 2025 at Chennai.