Loading judgment…
Facts
The assessee, engaged in mango trading, did not file an Income Tax Return for AY 2017-18. The Assessing Officer (AO) made additions based on cash deposits and non-cash deposits in the bank account, treating them as income. The assessee argued that cash deposits were sourced from prior withdrawals and that the profit rate should be based on past years' filings.
Held
The Tribunal held that the entire cash deposits could not be added as income and directed the AO to tax 8.3% profit on cash deposits. For non-cash deposits, the AO was directed to apply a profit rate of 8.3% and restrict the addition accordingly, as the assessee had consistently shown profits under Section 44AD in previous years.
Key Issues
Whether cash and non-cash deposits can be fully treated as income and if the profit rate applied by the AO is justified, considering the assessee's business and past filing history.
Sections Cited
250, 144B, 142, 144, 69A, 44AD
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCHES “SMC” :: PUNE
Assessment Year: 2017-18 Sandeep Yashwant Pawaskar, V The Income Tax Officer, C/o.Anup Shaha, 1756, Jutica, s Ward-1(1), Ratnagiri. Teli, Ratnagiri – 415612. Maharashtra. PAN: AKOPP5999D Appellant / Assessee Respondent / Revenue Assessee by Shri Anup Shaha Revenue by Shri Ambarnath Khule-JCIT(Through Virtual Hearing) Date of hearing 26/11/2025 Date of pronouncement 27/11/2025 आदेश/ ORDER
PER DR. DIPAK P. RIPOTE, AM:
This is an appeal filed by the Assessee against the order of ld.Commissioner of Income Tax(Appeal)[NFAC] passed under section 250 of the Income Tax Act, 1961 for the A.Y.2017-18dated 03.07.2025 emanating from the Assessment Order passed under section 144B of the Act, dated 02.12.2019. The Assessee has raised the following grounds of appeal :
1. On facts and circumstances of the case, it be held that the Ld.CIT(A) erred in confirming the addition made by the Ld.AO taking [A] entire deposits as income of the appellant during the year under consideration. The addition be held bad in law and against the provisions of the Act. The said addition be deleted and the appellant be granted just and proper relief in this respect.
2. On facts and circumstances of the case, it be held that the Ld.CIT(A) erred in confirming the addition made by the Ld.AO after taking into consideration the entire 10% of non-cash deposits as income of the appellant for the year under consideration. The addition be held bad in law and against the provisions of the Act. The said addition be deleted and the appellant be granted just and proper relief in this respect.
3. The appellant craves to add, amend, alter, modify or delete any of the above ground of appeal.”
We have heard both the parties and perused the records. In this case, the Assessing Officer observed that Assessee has not filed Return of Income for A.Y.2017-18. Assessing Officer received information regarding cash deposits by Assessee in his bank account. Assessing Officer issued notice u/s.142 of the Act. But Assessee failed to reply. Assessing Officer issued a show cause notice, however, Assessee failed to reply to the notice. Assessing Officer observed that there were cash deposits of Rs.26,21,500/- and other deposits of Rs.1,05,85,837/- in his bank account. In the assessment order, Assessing Officer also observed that Assessee had filed Return of Income for A.Y.2016-17 declaring himself as Mango 2 Trader under the Trade Name “Mayur Mango Suppliers”. For A.Y.2016-17, Assessing Officer observed that Assessee had declared 10% profit u/s.44AD of the Act. Since there was no compliance, Assessing Officer passed an order u/s.144 for A.Y.2017-18 on 02.12.2019. The Assessing Officer made addition u/s.69A of the Act, of Rs.26,21,500/-. Regarding the non-cash deposits of Rs.1,05,85,837/-, Assessing Office in the assessment order treated it as business receipt and added 10% of the total deposits of Rs.1,05,85,837/-.
Aggrieved by the Assessment Order, assessee filed appeal before the ld.CIT(A) who confirmed the Assessment Order.
Aggrieved by the order of ld.CIT(A), Assessee filed appeal before this Tribunal.
Ld.Authorised Representative(ld.AR) for the Assessee filed a paper book. Ld.AR submitted that Assessee has regularly filed Return of Income. Ld.AR filed copies of Return of Income for A.Y.2015-16, A.Y.2016-17 and A.Y.2018-19 at page no.2 to 15 of the paper book. Ld.AR admitted that due to some reasons, Assessee could not file Return of Income for A.Y.2017-18. Ld.AR submitted that Assessee is Mango Trader and this fact has been accepted by 3 Assessing Officer. Ld.AR further submitted that during the relevant Assessee has withdrawn Rs.60,99,000/- from the Bank Account. Ld.AR took us through the bank statement which is at page no.16 to 27 of the paper book. Ld.AR submitted that the cash deposit made during demonetization period of Rs.26,21,500/- were sourced from the cash withdrawals of Rs.60,99,000/- made prior to demonetization.
Ld.Departmental Representative(ld.DR) for the Revenue relied on the order of Assessing Officer.
It is a fact that Assessee is a Mango Trader, this fact has been accepted by the Assessing Officer in the Assessment Order and it is also observed from the Return of Income filed by Assessee for A.Y.2015-16, A.Y.2016-17 and A.Y.2018-19. The turnover shown by Assessee is as under : A.Y. Total Turnover Profit shown under % of 44AD profit 2015-16 Rs.72,34,228/- Rs.5,81,375/- 8% 2016-17 Rs.80,25,600/- Rs.6,70,525/- 8.35% 2018-19 Rs.91,42,039/- Rs.7,55,479/- 8.20% 7.1 Thus, Assessee has shown Profit under section 44AD in his Return of Income for the above years. Assessee has shown net profit of around 8%.
4 8. We have perused the bank statement filed by the Assessee and it is noted that there were cash withdrawals before demonetization.
It is also observed that Assessing Officer in the Assessment Order has taxed the non-cash deposits of Rs.1,05,85,837/- under 44AD. Assessing Officer has not brought on record any evidence to tax the cash deposits u/s.69A of the Act, when Assessing Officer has applied 44AD for the non-cash deposits appearing in the bank statement. There is no dispute that the Assessee is a Mango Trader and shown profit u/s.44AD in earlier year. Therefore, it is obvious that the cash of Rs.26,21,500/- was also from the same business. Therefore, the entire addition of Rs.26,21,500/- cannot be sustained. Assessee has shown 8% net profit in earlier years, however, Assessing Officer has made addition of 10% out of total non-cash deposits. Assessing Officer has not brought on record any evidence to increase the profit from 8% to 10%. In these facts and circumstances of the case, since Assessee has shown 8% to 8.3% profit in earlier years, we direct Assessing Officer to apply the profit rate at 8.3% to the non-cash deposits of Rs.1,05,85,837/- and restrict the addition of Rs.10,58,580/- to Rs.8,78,625/-. As far as cash deposits are concerned, we have already mentioned that entire cash deposits cannot be added and only profit can be taxed as it is an accepted fact that Assessee is a Trader. Therefore, we direct Assessing Officer to add 8.3% of Rs.26,21,500/-. Accordingly, 5 grounds of appeal raised by the Assessee are partly allowed.
In the result, appeal of the assessee is partly allowed. Order pronounced in the open Court on 27 November, 2025.