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Facts
An individual engaged in money lending did not file an income tax return for AY 2013-14. The AO, observing cash deposits, issued a Section 148 notice and subsequently completed the assessment by estimating the assessee's income at 8% of the total turnover, which the CIT(A) confirmed.
Held
The Tribunal found that the AO's estimation of income was not based on the assessee's past history or comparable businesses. Therefore, the matter was remanded back to the AO for fresh assessment in accordance with law.
Key Issues
Whether the estimation of income at 8% of turnover, based on cash deposits and without reference to past history or comparables, was a valid basis for assessment.
Sections Cited
139(1), 148, 147, 144B
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Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM
O R D E R This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-13, Mumbai [CIT(A)] dated 08.08.2024 for Assessment Year (AY) 2013-14.
Brief facts of the case are that the assessee is an individual 2. engaged in the business of money lending. No return of income was filed for AY 2013-14 u/s. 139(1) of the Income Tax Act, 1961 (the Act). Based on the information that the appellant made cash deposit in bank account, the Income Tax Officer, Ward-1 (hereinafter called Aravindakshan Nair "the AO") formed an opinion that income escaped assessment to tax. Accordingly, a notice u/s. 148 of the Act was issued on 30.03.2021. In response to the notice u/s. 148 return of income for AY 2013-14 was filed disclosing income of Rs. 1,97,600/-. Against the said return of income, the assessment was completed by the AO vide order dated 25.03.2022 passed u/s. 147 r.w.s. 144B of the Act at a total income of Rs. 16,93,109/-. While doing so, the AO estimated the income from business of money lending @ 8% on the total turnover/credits of Rs. 2,11,63,843/-.
Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order confirmed the action of the AO.
Being aggrieved, the appellant is in appeal before us in the present appeal.
The learned A.R. submitted that the AO erred in treating the 5. entire cash deposits as income of the appellant. It is further submitted that estimation of income at 8% of the turnover is without any basis. Thus, he submitted that the assessment order as confirmed by the CIT(A) is not based on actual income of the assessee but an arbitrary assessment. Therefore, the matter may be sent back to the AO for fresh adjudication.
Having heard the both the parties, I am of the considered 6. opinion that the matter requires remand to the AO as the estimation of income on the basis of turnover adopted by the AO is not clear.
Aravindakshan Nair The estimation of income is not based on past history of the assessee or on comparables, which are in the similar lines of business. Therefore I remand the matter back to the file of the AO for fresh assessment in accordance with law.
In the result, the appeal filed by the assessee stands allowed for statistical purposes..
Order pronounced in the open court on 10th February, 2025. 8.