Loading judgment…
Facts
The Assessing Officer made an addition of Rs. 1,22,00,000 under Section 68 and estimated an addition of Rs. 1,01,54,618 on account of gross profit. The CIT(A) deleted the addition under Section 68 and scaled down the gross profit addition.
Held
The Tribunal held that the CIT(A)'s deletion of the addition under Section 68 was justified, as the Revenue failed to provide evidence to rebut the assessee's explanation. Regarding the gross profit addition, the Tribunal upheld the CIT(A)'s order, finding no material to justify interference.
Key Issues
Whether the addition made by the AO under Section 68 for cash deposits during demonetization was justified, and whether the estimation of gross profit by the AO was excessive and without justification.
Sections Cited
143(3), 68, 145, 254, 44AD
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, LUCKNOW BENCH B, LUCKNOW
Before: SHRI ANADEE NATH MISSHRA & SHRI SUBHASH MALGURIA
(A) In this case assessment order dated 30/12/2091 was passed u/s 143(3) of the I. T. Act whereby the assessee’s total income was assessed at Rs.2,75,41,208/-, plus agricultural income of Rs.5,93,000/-. In the aforesaid assessment order, an addition of Rs.1,22,00,000/- was made u/s 68 of the Act and a separate addition of Rs.1,01,54,618/- was made to the gross
Page 2 of 16 profit disclosed by the assessee. The aforesaid addition of Rs.1,22,00,000/- was made on the ground that this amount was deposited by the assessee in cash, in demonetized currency, during the demonetization period. The Assessing Officer also enhanced the gross profit rate 2.55% declared by the assessee, resulting in the estimated addition of aforesaid amount Rs.1,01,54,618/-. The assessee filed appeal against the aforesaid assessment order in the office of the learned CIT(A). Vide the aforesaid impugned appellate order dated 23/09/2020 of the learned CIT(A), the aforesaid addition of Rs.1,22,00,000/- made u/s 68 of the Act was deleted. The learned CIT(A) took the view that no adverse view could be taken merely on the fact that the aforesaid deposits representing cash sales of the assessee were made in the bank account in a staggered manner. The learned CIT(A) was of the view that there could be numerous reasons for staggered deposits and security was one of the major concerns. The learned CIT(A) further stated that in many cases even banks advised for staggered deposits. Besides, the learned CIT(A) observed that demonetization was announced on 08/11/2016 and the appellant deposited last tranche of demonetized currency in the bank on 21/11/2016 i.e. just after few days.
(A.1) As regards the aforesaid addition of Rs.1,01,54,618/- to the gross profit disclosed by the assessee, the learned CIT(A) scaled down the estimated addition from Rs.1,01,54,618/- to Rs.10,20,693/- and the remaining addition was deleted by him. In this regard, the learned CIT(A) took the following precedents into consideration:
Page 3 of 16 Page 4 of 16 Page 5 of 16 Page 6 of 16 Page 7 of 16 Page 8 of 16 Page 9 of 16 Page 10 of 16 Page 11 of 16
Page 12 of 16 The learned CIT(A) was of the view that the rate of gross profit adopted by the Assessing Officer at excessive by any yardstick and without any justification, as against the gross profit rate of 2.55% disclosed by the Page 13 of 16 assessee. The learned CIT(A) held that the addition made by the Assessing Officer was based on conjectures and presumption and probability but not on any evidence on record.
(B) The present appeal has been filed by the Revenue against the aforesaid impugned appellate order of the learned CIT(A). In this appeal, many grounds have been taken. However, in effect, there are two disputes to be decided. The first dispute is regarding the aforesaid addition of Rs.1,22,00,000/- under section 68 of the I. T. Act. On this issue in dispute, the learned D.R. for Revenue relied on the order passed by the Assessing Officer. He drew our attention to the fact recorded in the assessment order, that the deposits were not made in one go, but in parts. However, he failed to state how the reasoning of the learned CIT(A), already summarized in foregoing paragraph (A) of this order, was incorrect. Learned A.R. for the assessee submitted at the time of hearing that the aforesaid amount was deposited in bank in demonetized currency within a short period i.e. a few days from the date of announcement of demonetization on 08/11/2016. She further submitted that the aforesaid amount of Rs.1,22,00,000/- represented cash balance in the books of the assessee arising mainly as a result of cash sales. She contended that cash sales is a common and well known practice in this line of business. She also submitted that the assessee had sufficient stock in trade in hand to effect the aforesaid sales of Rs.1,22,00,000/-. She contended that no discrepancy was noticed in the stock register maintained by the assessee. She also contended that the action of the Assessing Officer in making the aforesaid addition was unduly and unjustifiably coloured by the mere fact that the deposits were made in the banks in demonetized currency during demonetization period. She
Page 14 of 16 further contended that the addition has been made by the Assessing Officer based on doubts, human probability, conjectures and surmises; but without any evidence or credible material. She strongly supported the order of the learned CIT(A) on this issue. In rejoinder, the learned D.R. for Revenue once again relied on the assessment order, but failed to rebut the submissions and contentions of the learned Authorised Representative for the assessee.
(B.1.) After perusing the materials on record, the submissions made by the learned A.R. for the assessee at the time of hearing and the reasoning of learned CIT(A), discussed already in foregoing paragraph (A) of this order. It is held that the order of the learned CIT(A) regarding deletion of aforesaid addition of Rs.1,22,00,000/- is just, fair and in accordance with law having regard to specific facts and circumstances of this case. Revenue has failed to make any case to persuade us to interfere with the impugned order of the learned CIT(A) on this issue. Therefore, the order of the learned CIT(A) deleting the aforesaid addition of Rs.1,22,00,000/- is upheld.
(B.2) The second issue in dispute is regarding addition to the gross profit disclosed by the assessee. At the time of hearing, the learned D.R. for Revenue relied on the order passed by the Assessing Officer. The learned A.R. for the assessee submitted that the gross profit disclosed by the assessee was in line with the gross profit in the assessee’s line of business. She placed reliance on decided precedents referred to in impugned order of learned CIT(A). These precedents have already been referred to in foregoing paragraph (A.1) of this order. She also placed reliance on decided precedents filed in the course of appellate proceedings from the assessee’s side, as mentioned below:
Page 15 of 16 She also submitted that the action of the Assessing Officer in substantially enhancing gross profit rate was unreasonable, excessive and unjust and without any justification, evidence or credible material. She submitted that the learned CIT(A) also erred in not accepting the book results of the assessee and in sustaining the aforesaid addition of Rs.10,20,693/-. She contended that there was no material before the learned CIT(A) or the Assessing Officer to enhance the gross profit disclosed by the assessee. She submitted that the addition made by the Assessing Officer and even reduced
Page 16 of 16 amount sustained by the learned CIT(A) in the impugned order was unfair, unjust and unreasonable. After perusing materials on record, and decided precedents, and specific facts and circumstances of the present case, it is held that Revenue has failed to make a case to persuade us to interfere with the order of the learned CIT(A) on this issue. No material has been brought for our consideration to show that the gross profit determined by the learned CIT(A) was on the lower side or was an under estimation. In view of the foregoing, the order of the learned CIT(A) in sustaining the addition of Rs.10,20,693/- on account of gross profit and in deleting the remaining amount out of total addition of Rs.1,01,54,618/- is upheld. (B.2.1) All the grounds of appeal are treated as disposed of in accordance with the aforesaid. (C) In the result, the impugned order of learned CIT(A) is sustained, and the appeal is dismissed.
(Order pronounced in the open court on 02/01/2025)