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Facts
The assessee is in appeal against the CIT(A)'s order for AY 2017-18. The AO estimated profit at 8% on a sum of Rs.3,41,39,137/- deposited in the assessee's bank account. A further sum of Rs.21 lacs deposited during demonetization was treated separately and taxed under Section 115BBE.
Held
The Tribunal held that the sum of Rs.21 lacs deposited during demonetization should not be treated separately. It should be included in the total turnover, and profit estimated at 8%, with the normal rate of tax applied.
Key Issues
Whether the sum deposited during demonetization should be treated as part of the gross turnover and profit estimated at 8%, or taxed separately under Section 115BBE.
Sections Cited
115BBE, 69A
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Income Tax Appellate Tribunal, DIVISION BENCH, ‘B’ CHANDIGARH
Before: SHRI RAJPAL YADAV & SHRI KRINWANT SAHAY
the order of the Commissioner of Income Tax (Appeals) [in short ‘the CIT (A)’] dated 28.02.2024 passed for assessment year 2017-18. The assessee has taken seven grounds of appeal, but the grievance of the assessee revolves around a single issue namely, a sum of Rs.27,31,131/- deposited A.Y.2017-18 2 during demonetization is required to be treated at par with the other credit entries on which profit has been estimated at 8% by the AO.
With the assistance of ld. Representative, we have gone through the record carefully. The assessee has not filed his return of income for assessment year 2017-18. The AO on perusal of various bank accounts maintained by the assessee found that in bank account opened with the Punjab National Bank, Chowk Saidan, Ludhiana, a sum of Rs.3,41,39,137/- has been deposited. On enquiry, it revealed that basically assessee was trading in the clothes, therefore, to the extent of credit entry of Rs.3,41,39,147/-, AO has treated it as a gross turnover of the assessee and estimated the profit at 8%. However, a sum of Rs.21 lacs were also found to be deposited but this was deposited during demonetization.
The stand of the assessee is that both amounts cannot be segregated. It also pertains to the business of the assessee and on account of illness, he could not file the return in time. However, ld. AO did not accept this stand of the assessee to the extent of Rs.21 lacs and assessed it A.Y.2017-18 3 separately and charged the tax under Section 115BBE. In other words the computation made by the AO is : a) Addition of Rs.21 lacs under Section 69A b) 8% profit of the gross turnover worked out at Rs.27,31,131/-
Assessed total income at Rs.48,31,131/-
The assessee has not raised any grievance to the extent of estimation of income at Rs.27,31,131/-. His only grievance is that Rs.21 lacs should also be made part of the gross turnover and 8% profit ought to be calculated at this also.
The appeal to the CIT(A) did not bring any relief to the assessee.
With the assistance of ld. Representative, we have gone through the record carefully. A perusal of the record would reveal that there are credit entries to the extent of Rs.3,41,39,137/-. The AO treated these entries as business receipts of the assessee and estimated the profit at 8%. We fail to understand as to why a different treatment has been given to a sum of Rs.21,00,000/- which is also available in this very account only, there is a time difference of deposit but because this amount was deposited in different months A.Y.2017-18 4 i.e. during demonetization, it will not take a separate colour.
It should also be made part of the total turnover and thereafter 8% be taken. Accordingly, we direct the AO that only 8% of Rs.21 lacs be estimated and it be added in the total income of the assessee. The tax rate on this 8% would also be normal tax rate as is applied on alleged addition of Rs.27,31,131/-. In other words, Rs.3,41,39,397/- + Rs.21,00,000/- = Rs.3,62,39,397/- 8% be applied on this figure and normal rate of tax be charged upon the assessee.
The appeal of the assessee is partly allowed. The AO is directed to modify the assessment order accordingly.
In result, the appeal of the assessee is partly allowed.
Order pronounced on 17.01.2025.