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Facts
The assessee, a retail seller of groceries, appealed against an order that treated cash deposits and other credits as income. The original assessment was framed under best judgment basis u/s.144 of the Act.
Held
The Tribunal held that artificial segregation of cash deposits during demonetization and other periods was not justified. It also found that the gross profit rate declared by the assessee was 1.74%.
Key Issues
Whether cash deposits in bank accounts by a retail seller of groceries, evidenced by VAT returns, can be arbitrarily treated as income, and the appropriate profit rate to be estimated.
Sections Cited
144, 69A, 143(3)
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Income Tax Appellate Tribunal, “A” BENCH, CHENNAI
Before: HON’BLE SHRI ABY T. VARKEY, JM & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2017-18 arises out of the order of learned Commissioner of Income Tax (Appeals) National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 30-03- 2024 in the matter of an assessment framed by the Ld. AO on best judgment basis u/s.144 of the Act on 06-11-2019. The registry has noted delay of 158 days in the appeal, the condonation of which has been sought by the Ld.AR on the strength of the affidavit of the assessee. It has been stated that the assessee being a retail seller of groceries was not well versed with electronic regime and thus, he could not receive the order of Ld. CIT(A) through portal or e-mail. Considering the averments in the affidavit and period of delay, the delay is condoned and we proceed with disposal of the appeal on merits.
Upon perusal of assessment order, it could be seen that the assessee deposited cash of Rs.220.38 Lacs in its bank accounts. There were other credits for Rs.26.56 Lacs. In the absence of any explanation as forthcoming from the assessee, Ld. AO added amount of Rs.220.38 Lacs u/s 69A and estimated business income of 8% on other credit for Rs.26.56 Lacs.
The Ld. CIT(A) considered the fact the assessee was running groceries retail trade and therefore, held that entire deposits could not be considered as income of the assessee. The cash deposits during demonetization aggregated to Rs.30.95 Lacs which were held to be rightly added u/s 69A. On remaining cash deposits, Ld. CIT(A) estimated income of 8%. Aggrieved, the assessee is in further appeal before us.
It is undisputed fact that the assessee is engaged in retail trade and deposits in the bank accounts represent business receipts for the assessee. The assessee does not have any other source of income. The deposits are duly evidenced by VAT returns for this year which are placed on record. There are no abnormal cash deposits during demonetization period. Therefore, artificial segregation of cash deposits during demonetization and cash deposits during other period could not be held to be justified. So far as the profit rate is concerned, Ld. AR has tabulated the sales and purchase for whole of the year to demonstrate that the assessee earned Gross Profit Rate of 1.74% in this year. Considering all these facts, we direct Ld. AO to estimate income of 3% on total cash deposits of Rs.220.38 Lacs as well as on other credits for Rs.26.56 Lacs. No other ground has been urged in the appeal.
The appeal stand partly allowed. Order pronounced on 3rd February, 2025 Sd/- Sd/- (ABY T. VARKEY) (MANOJ KUMAR AGGARWAL) �ाियक सद� /JUDICIAL MEMBER लेखा सद� / ACCOUNTANT MEMBER चे4ई Chennai; िदनांक Dated : 03-02-2025 DS आदेश की Hितिलिप अ$ेिषत / Copy of the Order forwarded to : 1. अपीलाथ�/Appellant 2. � थ�/Respondent 3. आयकरआयु=/CIT Coimbatore/Madurai/Chennai. 4. िवभागीय�ितिनिध/DR 5. गाडBफाईल/GF