INCOME TAX OFFICER, WARD-1, NANDED vs. RAKESH HUKUMCHAND AGARWAL, NANDED

The Ld. CIT(A) erred in appreciating the facts of the case as the assessee's case needs to be audited as his total receipts are above one crore for the year under consideration. The assessee has violated the provision of under section 44AB of the 1.T.Act, 1961. Hence, the order of the CIT(A) deserve to be set-aside and to be remitted the file to AO for fresh assessment.

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3. Facts of the case, in brief, are that the assessee is an individual and was engaged in the business of grain merchant and trading during the year under consideration. The assessee did not file his income tax return u/s 139 of the IT Act. On the basis of information that the assessee has deposited huge cash in his account maintained with M/s Shri Renuka Mata Multi State Urban Cooperative Society and no return has been filed, his case was reopened u/s 147 of the IT Act and notice u/s 148 was issued to the assessee. The assessee filed his return of income on 26.04.2021 in response to notice issued u/s 148 and declared business income of Rs.1,98,820/. After considering the reply of the assessee, the Assessing Officer completed the assessment u/s 147 r.w.s. 144B of the IT Act Rs.2,63,09,022/- as against the income returned by the assessee at Rs.1,98,820/-. The above assessed income includes addition on account of unexplained cash credit u/s 68 of Rs.2,61,10,199/- which is the total of credit side of account maintained with M/s Shri Renuka Mata Multi State Urban Cooperative Society.

4. After considering the reply of the assessee, Ld. CIT(A)/NFAC partly allowed the appeal of the assessee by observing as under :- “4.3 The appellant had requested since the AO had already accepted the business activities done in the name & style of SRMSC, the addition u/s 68 is not to be made. Whereas, alternatively submitted that he may kindly be granted peak credit or income may be taken at 1 or 2% as per the previous year’s net profit since the average gross margin in the line of business operates at 4% of sales. With regard to the above discussion, the above claims of the appellant’s business with SRMSC are found to true. The appellant is running the grain merchant business and the same is also accepted by the AO in the assessment order. Having come to the conclusion that the appellant is running regular business and adding entire cash deposit u/s 68 of the Act is not correct. More reasonable way to estimate the income out the sales is estimating the Net Profit of the business. Even though the appellant submitted that the gross margin is 4%, the appellant did not file the ROI and offer correct income. Since, the appellant claims that he is carrying out the grain merchant business throughout the year, the fluctuations in the grain prices will not make NP not less than 8% where normal NP in this trade is more than 8%. In this regard, the AO is directed to assess the income at 8% of Rs.2,61,10,199/- i.e. total cash deposits made with SRMSC. Therefore, the grounds of the appellant are hereby partly allowed. 4.4 In the result, the appeal is partly allowed.”

6. Ld. DR appearing from side of the Revenue submitted before us that the assessee has only considered an amount of Rs.2,31,83,247/- in his return of income furnished in response to notice u/s 148 of the IT Act which is less than the total cash deposit of Rs.2,61,10,199/-. Accordingly, it was the contention of Ld. DR that the remaining amount of Rs.29,26,952/- should be added u/s 68 as unexplained cash credit to the income of the assessee.