INCOME TAX OFFICER WARD HINGOLI, PARBHANI vs. MAHAMAD KHAYYUM MAHAMAD HANIF SHAIKH, HINGOLI

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ITA 116/PUN/2025Status: DisposedITAT Pune08 December 2025AY 2017-185 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the Revenue's grounds of appeal were dismissed. The Tribunal noted that the assessee had contended before the CIT(A) that he carried out transactions on a commission basis, with commissions normally ranging between 2% to 5%. The assessee claimed to have earned 2%, but the CIT(A) finally estimated the commission/net profit at 5%. The Tribunal found no inconsistency in the CIT(A)'s finding, as the CIT(A) had considered the nature of the assessee's transactions and his business operating on a commission basis, thus rightly applying a profit rate of 5%. Therefore, no interference was called for in the CIT(A)'s finding. The appeal of the Revenue was dismissed.

What were the facts?

The Revenue is in appeal against the order of the CIT(A) for Assessment Year 2017-18. The assessee, Mahamad Khayyum Mahamad Hanif Shaikh, did not file a return of income. Based on bank deposits of ₹99,73,439/-, the Assessing Officer (AO) made an addition invoking Section 609A of the Act. The CIT(A), considering the assessee's business of scrap purchase and sale on a commission basis, treated the cash deposits as turnover and estimated the net profit at 5%. The Revenue's appeal challenges this estimation. The assessee did not appear before the Tribunal, and the appeal was decided ex-parte.

What were the issues?

1. Whether the CIT(A) erred in treating cash deposits as turnover and estimating income at 5% of such deposits, instead of applying the presumptive income rate under Section 44AD of the Income Tax Act, 1961. Assessee's contentions: The assessee contended before the CIT(A) that he was involved in the purchase and sale of scrap, collecting cash from buyers and depositing it. He claimed to earn only a 2% commission on these transactions and requested that the cash deposits be treated as turnover with income estimated at 2% commission. Revenue's contentions: The Revenue argued that the CIT(A) erred in treating cash deposits as turnover and estimating income at 5%. It contended that in the absence of books of accounts, the net profit should have been estimated at 8% as per Section 44AD of the Act, or at least that 8% should have been taken as a benchmark. The Revenue also submitted that the bank account showed regular inflow and outflow of funds, indicating business income that should be estimated under Section 44AD.

Which sections of the Income-tax Act were involved?

Section 250,Section 147,Section 144,Section 144B,Section 44AD,Section 148,Section 142(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, PUNE “A” BENCH : PUNE

Before: DR. MANISH BORAD & SHRI VINAY BHAMORE

I.T.A.No. 116/PUN/2025 (Assessment Year 2017-2018) ITO, Ward-Hingoli Mahamad Khayyum Mahamad Hanif Shaikh, K.G.N. Scrap Centre, Near vs. Ambika Takies, Hingoli, Maharashtra. PAN : AKTPM 8184 G (Appellant) (Respondent) For Assessee : None For Revenue : Shri Bharat Andhale, Addl.CIT (virtual) Date of Hearing : 03.12.2025 Date of Pronouncement : 08.12.2025 ORDER

PER : MANISH BORAD, AM

1.

This appeal at the instance of the Revenue is directed against the order of National Faceless Appeal Centre(NFAC)/ Commissioner of Income Tax (Appeals), Delhi [“CIT(a)”] dated 20/11/2024 passed under section 250 of the Income Tax Act, 1961 (“Act”) which is arising out of order u/s. 147 r.w.s. 144 r.w.s. 144B of the Act for the Assessment Year (AY) 2017-18.

2 ITA.No.116/PUN./2025 (Mahamad Khayyum Mahamad Hanif Shaikh) 2. Revenue has raised the following grounds of appeal:-

1. On the facts and in the circumstances of the case, the Ld. CIT (A). NFAC failed to appreciate the facts of the case and without considering the same decided the case in favour of the assessee which is against the law and the order of the CIT (A) deserves to be set-aside.

2. The Ld. CIT (A), NFAC erred in law in holding that the total cash deposits of the assessee as a turnover and also erred in treating 5% of such cash deposits as income of the assessee.

3. The Ld. CIT(A), NFAC erred in appreciating the fact that even as per IT Act, 1961, presumptive income on such cash sales u/s 44AD is 8% of the total turnover. Ld. CIT(A), NFAC ought to have appreciated that at least this rate i.e. 8% should have been taken as the benchmark in this case as there are no books of accounts are maintained by the assessee.

4. The appellant craves leave to add, amend or alter all or any of the Grounds of Appeal.

3. When the case called for, none appeared on behalf of the assessee. In the past also, assessee failed to appear on the dates fixed for hearing on 07/05/2025 & 17/07/2025. We, therefore, proceed to adjudicate the appeal exparte qua assessee with the assistance of Ld.Departmental Representative (DR) and the documents available on record.

4. At the outset, Ld. DR submitted that only issue for consideration is regarding the calculation of income on the business transaction carried out by the assessee during the year. He submitted that assessee is carrying out the business activity and in absence of books of accounts, net profit ought to have been estimated u/s. 44AD of the Act by Ld.CIT(A) @ 8% as against 5% held in the impugned order. He also submitted that in the bank account maintained 3 ITA.No.116/PUN./2025 (Mahamad Khayyum Mahamad Hanif Shaikh) with Shri Renuka Mata Multi State Urban Cooperative Society, there are regular inflow and outflow of funds and therefore, it should be treated as business income and should have been estimated as per the provisions of section 44AD of the Act and net profit @ 8% ought to have been applied.

5.

We have heard Ld. DR and perused the records placed before us. We observe that assessee is an individual and did not file return of income for A.Y. 2017-18. Based on the information about deposits in the bank account held with Shri Renuka Mata Multi State Urban Cooperative Soceity, valid notices u/s. 148 and 142(1) of the Act were issued and served upon the assessee. In absence of any reply, Ld.AO made the addition for the total amount received from the bank account amounting to ₹ 99,73,439/- invoking section 69A of the Act. Further, Ld.CIT(A) on due consideration of the fact that assessee is in the business of purchase and sale of scrap from vendors and buyers and assessee earns commission on such transactions, partly allowed the assessee’s appeal computing the net profit @ 5% on the alleged cash deposits observing as follows:-

4(b) I have gone through the facts and circumstances of the case. I have also considered the assessee’s submissions. From the facts of the case, it is noticed that the assessee deposited cash to the tune of ₹ 99,73,439/- in the bank account of M/s.Shri Renuka Mata Multi State urban Cooperative Society account no.107805001000031. The assessee stated that he was involved in purchase and sale of scrap and he was collecting cash from different buyers of scrap and the same 4 ITA.No.116/PUN./2025 (Mahamad Khayyum Mahamad Hanif Shaikh) was deposited in the above accounts. The assessee further states that he was only receiving 2 per cent commission from the above scrap sales. The assessee furnished bank account. I have perused the bank account and found that there were regular cash deposits throughout the year and there were cash payments and cheque transfers. The transactions of cash deposits are there through the year but not during the demonetization period. Thus, it appears that there is some truth in the assessee’s contentions. However, the assessee requested for charging 2 per cent of the commission by treating the above cash deposits as turnover. The assessee only submitted part details but could not fully establish by filing all the relevant details. Therefore,, in the interest of revenue, the cash deposits are hereby treated as turnover of the assessee and 5% of the cash deposits are hereby estimated as income of the assessee. Accordingly, the ground raised by the appellant is hereby partly allowed.

6.

Before us, Ld. DR has not disputed the fact that assessee is carrying on business activity, but the only dispute is against application of net profit rate @ 5% as against 8% mandated u/s. 44AD of the Act. We note that assessee has contended before the Ld.CIT(A) that he carries out the transactions on commission basis and normally such commission range between 2%-5%. The assessee stated to have earned 2%, however, Ld.CIT(A) has finally estimated commission/net profit @5%. We fail to find any inconsistency in the finding of Ld.CIT(A) as he has taken note of nature of transactions carried out by the assessee and also business of the assessee, who works on commission basis and, therefore, he has rightly applied profit rate of 5%. No interference is called for in the finding of Ld.CIT(A). Thus, grounds of appeal raised by the Revenue are dismissed.

5 ITA.No.116/PUN./2025 (Mahamad Khayyum Mahamad Hanif Shaikh) 7. In the result, appeal of the Revenue is dismissed.

Order pronounced in the open Court on 08.12.2025.

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