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Income Tax Appellate Tribunal, HYDERABAD BENCHES “SMC-B”, HYDERABAD
Before: SHRI MANJUNATHA. G & SHRI K.NARASIMHA CHARY
आदेश / ORDER PER K. NARASIMHA CHARY, J.M: Aggrieved by the order dated 27/09/2024 passed by the learned Addl / Joint Commissioner of Income Tax (Appeals)-8, Mumbai (“Ld. CIT(A)”), in the case of Venkatesham Avula (“the assessee”), assessee preferred this appeal. 2. Briefly stated facts are that the assessee is an individual and filed his return of income for the AY 2017-18 on 23.03.2018 declaring income of Rs. 3,28,710/- from trading of livestock and sale of milk. No�cing certain cash deposits in bank accounts during the demone�za�on period learned Assessing Officer picked up the case for scru�ny and vide order dated 26.12.2019 computed the assessee’s income at Rs. 13,49,654/-.
When the assessee preferred appeal, learned CIT(A), by way of impugned order es�mated the income of the assessee at 12% rate of profit on the total cash deposit of Rs. 53,82,500/- deposited during en�re financial year and directed the dele�on of the other addi�ons made by the learned Assessing Officer, thereby partly allowed the assessee’s appeal. Challenging the es�mate of income by the learned CIT(A), assessee preferred this appeal.
Learned AR vehemently submi�ed that the es�ma�on of income at 12% of the cash deposits is not sustainable. He has taken us through the margin of net profit would be around 4% to 4.5%. According to him, the average percentage of the business of the assessee is approximately 6%. He pleaded that in terms of sec�on 44AD, it would be reasonable to es�mate the income of the assessee at 6% on the total deposits.
Learned DR placed reliance on the orders of the authori�es below.
We have gone through the record in the light of the submissions made on either side. It could be seen from the Orders of the authori�es that the reason for making es�ma�on of income is non-maintenance of proper book of accounts to compute the correct income. learned Assessing Officer, therefore, resorted to making es�ma�on of taxable income of assessee at 16%, on the por�on of deposit made during en�re FY excluding the demone�sa�on period. It could, however, be seen that the en�re amount deposited during demone�za�on period was brought as unaccounted income u/s 69A of the Income Tax Act, 1961 (the Act) and taxed u/s 115BBE of the Act. The es�ma�on of profit at 16% was made by denying the benefit of the provisions of sec�on 44AD of the Act on the reason of eligibility factors. But the learned CIT(A) directed the learned Assessing Officer to adopt net profit at 12% on the total cash deposits.
Page 2 of 4 Assessee claims that the en�re cash deposits are nothing but the business receipts.
Learned CIT(A) accepted that the total deposits made in cash in bank account during the FY 2016-17 are the business receipts of the assessee. The turnover of assessee is less than Rs.1 Crore during the FY. All such deposits are less than the threshold limits of sec�on 44AD of the Act and the assessee is not required to maintain the books, under the provisions of sec�ons 44AD, where the books of A/c are not maintained and not mandated to be maintained, the income is to be es�mated at reasonable rate of profit at 8% or 6%.
We, therefore, having regard to the business ac�vity of the assessee in dealing with the livestock and milk and while considering the provisions of Sec�on 44AD of the Act, find it just and proper to es�mate the rate of profit at 8% as against the profit es�ma�on at 12% done by the learned CIT(A). We, accordingly, direct the learned Assessing Officer to es�mate the income at 8% of the cash deposits of Rs. 53,82,500/-. Assessee did not press the other grounds. Grounds of the appeal are according allowed in part.
In the result, appeal of the assessee is allowed in part. Order pronounced in the open court on the 23rd January, 2025.