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Facts
The assessee, engaged in wholesale trade of mobile phones and laptops, filed a return declaring Rs. 38,87,660. The Assessing Officer assessed the total income at Rs. 1,06,42,307 and made an addition of Rs. 67,54,647. The CIT(A) found excess cash realization and directed to charge extra gross profit @20%. The assessee appealed against this.
Held
The Tribunal dismissed the Revenue's appeal as it was not maintainable due to low tax effect. For the assessee's appeal, the Tribunal found the 20% rate for extra gross profit excessive and directed the Assessing Officer to charge it at 10%, granting partial relief to the assessee.
Key Issues
Whether the rate of 20% for charging extra gross profit on excess cash realization is excessive, and if a lower rate of 10% would be reasonable and fair.
Sections Cited
147, 143(3), 263
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Income Tax Appellate Tribunal, LUCKNOW BENCH ‘A’, LUCKNOW
Before: SHRI ANADEE NATH MISSHRA & SHRI SUBHASH MALGURIA
These are the cross appeals filed by the assessee and by Revenue against impugned appellate order dated 24/09/2020 passed by learned Commissioner of Income Tax [“CIT(A)” for short]. For the sake of convenience these two appeals are decided through this consolidated order.
First we will deal with the appeal filed by Revenue. At the time of hearing before us, it was observed, on perusal of Form-36 in which the appeal has been filed, that the total tax effect is stated to be less than Rs.60,00,000/-. As instructed by Central Board of Direct Taxes, for filing the appeal in Income Tax Appellate Tribunal against order of the learned CIT(A), if the tax effect is upto Rs.60,00,000/- no appeal should be filed by Revenue before the Income Tax Appellate Tribunal. Representatives of both sides, the learned Sr. D.R. for Revenue and the learned Counsel for the assessee were in agreement that the tax effect being below Rs.60 lac, the appeal filed by Revenue is not maintainable and should be dismissed.
(C) In view of foregoing and as representatives of both sides are in agreement on this, the appeal of Revenue is dismissed in limine without going into the merits of the case.
(D) Now we will take up the appeal filed by the assessee. The facts of the case, in brief, are that the assessee is an individual and engaged in the whole sale trade of mobile phone and laptops of Lenovo and Lava brand
Page 3 of 4 under the name and style of M/s Sanskriti Telecom. The assessee filed her return of income, declaring total income of Rs.38,87,660/-. The case was selected for scrutiny and the total income of the assessee was assessed at Rs.1,06,42,307/-. The assessee had deposited Rs.120 lacs in her bank account during demonetization period. The Assessing Officer asked the assessee regarding the source and the details of deposits. The assessee submitted that the deposits were made out of realization from outstanding sundry debtors and cash sales. The Assessing Officer rejected the contention of the assessee and made addition of Rs.67,54,647/- (i.e. the difference between the income declared by the assessee and the income assessed by the Assessing Officer). The assessee carried the matter in appeal before the learned CIT(A). The learned CIT(A), on the basis of monthwise details of cash realized from the credit sales, came to the conclusion that the average cash receipts are 21.54% for the period upto September 2016. For the month of November, the realization should have been Rs.90,14,527/- whereas the actual realization disclosed by the assessee is Rs.1,13,28,142/-. Thus the learned CIT(A) came to the conclusion that the assessee has disclosed excess cash realization of Rs.23,13,615/-. The learned CIT(A) directed to charge extra gross profit @20% (i.e. Rs.4,62,723/-) on Rs.23,13,615/-. Aggrieved, the assessee is in appeal before the Income Tax Appellate Tribunal. The learned Authorized Representative for the assessee submitted that the rate of 20% is excessive. She contended that a rate of 10% would be reasonable and fair in the facts and circumstances of the case. However, the learned D.R. for Revenue supported the order of the learned CIT(A).
Page 4 of 4 (E) We have heard the rival parties and have gone through the material placed on record. The learned CIT(A) has directed to charge extra gross profit @20% on Rs.23,13,615/-, thereby sustaining addition of Rs.4,62,723/-. However, we are in agreement with the contention of the learned A.R. for the assessee that the rate of 20% is excessive; and that a rate of 10% would be reasonable and fair in the facts and circumstances of the case. Accordingly, we direct the Assessing Officer to charge extra gross profit @10% on Rs.23,13,615/-. Thus, the assessee gets a relief of Rs.2,31,361.50; and balance addition of Rs.2,31,361.50 is sustained.
(F) In the result, the appeal of Revenue is dismissed and the appeal of the assessee is partly allowed.
(Order pronounced in the open court on 07/02/2025)