SELVAPERUMAL GOVINDARAJ,THIRUVALLUR vs. ITO, WARD-1., THIRUVALLUR
What did the Tribunal hold?
The Tribunal noted that Section 44AD of the Act is not applicable to commission agents. Following its own previous order on identical facts, the Tribunal reduced the estimated profit rate to 4% of the total credits.
What were the facts?
The assessee, an agricultural produce commission agent, had a total credit of Rs. 2,72,80,178/- in his bank account. The Assessing Officer reopened the case and estimated profit at 12% of total credits. The CIT(A) reduced this to 8%, providing partial relief.
What were the issues?
Whether the estimation of profit at 12% of total credits by the AO for an agricultural produce commission agent is justifiable, and if a lower estimation rate should be applied as per precedent.
Which sections of the Income-tax Act were involved?
Section 250,Section 148,Section 143(3),Section 147,Section 44AD,Section 44AD(6)(iii)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI GEORGE GEORGE KAND SHRI S.R. RAGHUNATHA
O R D E R
PER GEORGE GEORGE K, VICE PRESIDENT:
This appeal at the instance of the assessee is directed against Addl/Joint CIT(A)-5, Mumbai, order dated 27.11.2024, passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2015-16.
The assessee is an individual. He is an agricultural produce commission agent. During the financial year, there was total credit of Rs.2,72,80,178/- in the bank account of the assessee. The case of the was reopened and notice u/s.148 was issued. In response to the notice issued u/s.148, the assessee filed his return of income on 19.04.2019 admitting total income of Rs.3,52,870/-. The assessment was completed u/s.143(3) r.w.s 147 of the Act vide order dated 27.12.2019. In the said reassessment order, the AO assessed total income at Rs.26,85,695/-. The AO made addition of Rs.23,32,825/- by estimating the profit at 12% of total credits in the bank account of the assessee amounting to Rs.2,72,80,178/-.
Aggrieved by the assessment order, the assessee filed an appeal before the First Appellate Authority. The CIT(A) reduced estimation of profit at 8% of net profits instead of 12% estimated by the AO. Accordingly, partial relief was given by the CIT(A). Aggrieved by the order of the CIT(A) , the assessee has filed present appeal before the Tribunal.
The Ld.AR submitted that on identical facts, Chennai Bench of the Tribunal in assessee’s own case for AY 2013-14 in [order dated 08.04.2022] had reduced estimation of net profit to 4% on the credits made in the bank account of the assessee. The Ld.AR has placed on record a copy of ITAT., Chennai order (supra).
The Ld.DR supported the orders of lower authorities.
6. We have heard rival submissions and gone through orders of authorities below. The assessee is a commission agent for agricultural produce. He was carrying on the same business for the AY 2013-14 as well as the relevant assessment year. On identical facts in assessee’s own case, ITAT., Chennai Bench of the Tribunal had reduced net profit estimation to 4% of total receipt credited in the bank account of the assessee. The relevant finding of the Chennai Bench of the Tribunal in assessee’s own case (supra) reads as follows:- “4. We noted that the legal position is very clear that profit rate as mentioned in the provisions of Section 44AD of the Act, cannot be applied to commission agents who are doing business of agency commission or earning commission income only in view of provisions of Section 44AD(6)(iii) of the Act. Hence, as canvassed by ld.counsel for the assessee, a reasonable profit can be estimated. Accordingly, we estimate the profit at the rate of 4% of total credits determined by the AO at Rs.1,58,01,195/-, after deducting sweep transfers. The AO will recompute the income accordingly.”
Since the facts of the instant case and the facts considered in assessee’s own case are identical, we reduce estimation of profit @ 4% of the total credits determined by the AO at Rs.2,72,80,178/- after deducting sweep transfers. It is ordered accordingly.
8. In the result, appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 19th February, 2025.
More judgments on Section 148
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- Sar Business Tradelink Private Limited… vs Income Tax Officer, Ward - 1(2), RaipurITA 599/RPR/2026[2014-15]Status: Heard21 Oct 2026AY 2014-15
- Neo Incorporation, Rajkot vs DCIT Circle- 1(2), RajkotITA 471/RJT/2026[2012-2013]Status: Disposed21 Oct 2026AY 2012-2013
- Adj Agri International LLP, Rajkot vs The Income Tax Officer, Ward-1(1)(1), RajkotITA 1198/RJT/2026[2018-19]Status: Disposed21 Oct 2026AY 2018-19
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