SARASWATI GUPTA,HOWRAH vs. ITO, WARD-47(1), KOLKATA

The assessee in the present case is an individual, who filed her return of income for the year under consideration on 31.03.2013 declaring total income of Rs.2,34,620/-. The said return was initially processed by the Assessing Officer under section 143(1) of the Income Tax Act, 1961 on 11.02.2014. Thereafter he received information about the Bank account maintained by the assessee with Bank of India, Salkia Branch, Howrah, wherein huge transactions were reflected. On the basis Assessment Year: 2012-2013 Saraswati Gupta of the said information, the Assessing Officer reopened the assessment for the year under consideration and issued a notice under section 148 to the assessee. During the course of assessment proceedings, the assessee was called upon by the Assessing Officer to explain the nature and source of total credits/deposits found to be made in her Bank account with Bank of India, Salkia Branch, Howrah aggregating to Rs.2,39,30,000/-. In reply, it was explained by the assessee that the said credits/deposits represented sale proceeds of her trading business. It was also submitted by the assessee that profit calculated @ 2% in respect of the said sale could be treated as her income from the transactions reflected in the Bank account with Bank of India, Salkia Branch, Howrah since the profit declared by her from the trading business for the year under consideration as well as for the earlier years was around 2%. This explanation of the assessee was not found fully acceptable by the Assessing Officer. He treated the peak credit appearing in the bank account of the assessee calculated on incremental basis at Rs.25,30,000/- as the unexplained cash credit and an addition to that extent was made by him to the total income of the assessee under section 68. He also made a further addition of Rs.19,14,400/- to the total income of the assessee on account of profit @ 8% on the unaccounted turnover of Rs.2,39,30,000/- as reflected in the Bank account of the assessee with Bank of India, Salkia Branch, Howrah. Accordingly a total addition of Rs.44,44,400/- was made by the Assessing Officer to the total income of the assessee in the assessment completed under section 143(3)/147 of the Act vide an order dated 20.12.2018.

Against the order passed by the Assessing Officer under section 143(3)/147 of the Act, an appeal was preferred by the assessee before the ld. CIT(Appeals). After considering the submissions made on behalf of the assessee as well as the material available on record, the ld. CIT(Appeals) found merit in the contention raised on behalf of the assessee that the peak credit in the Bank account of the assessee as Assessment Year: 2012-2013 Saraswati Gupta worked out by the Assessing Officer on incremental basis at Rs.25,30,000/- could not be added under section 68 as the Bank account of the assessee with Bank of India, Salkia Branch, Howrah did not constitute books of account of the assessee. To arrive at this conclusion, he relied on the various judicial pronouncements as discussed in his impugned order. He accordingly deleted the addition of Rs.25,30,000/- made by the Assessing Officer on account of incremental peak credit in the Bank account of the assessee by invoking the provisions of section 68. He, however, confirmed the addition of Rs.19,14,400/- made by the Assessing Officer on account of profit from the unaccounted profit @ 8% allegedly earned by the assessee from the unaccounted sale of Rs.2,39,30,000/- observing that even though the profit of 2% was declared by the assessee in respect of disclosed sales, no evidence could be provided by the assessee to show that the profit on undisclosed sales was the same as declared in respect of sales recorded in the books of account. Aggrieved by the order of the ld. CIT(Appeals), the assessee has preferred this appeal before the Tribunal.

I have heard the arguments of both the sides and also perused the relevant material available on record. As submitted by the ld. Counsel for the assessee, the profit from the disclosed sales as declared/recorded by the assessee in her books of account for the year under consideration as well as for the immediately preceding years being around 2%, the presumption could justifiably be drawn that the profit earned by the assessee from the unaccounted sales should be around 2%, especially when there was nothing brought on record by the Assessing Officer that the profit actually earned by the assessee from the undisclosed sales was abnormally higher than the profit declared by the assessee in respect of disclosed sales. The ld. D.R., on the other hand, has submitted that since the huge amount of sales as reflected in the Bank account of the assessee with Bank of India, Salkia Branch, Howrah was not declared by the assessee and the same was also not recorded in the books of account, the Assessment Year: 2012-2013 Saraswati Gupta actual profit earned by the assessee from such unaccounted sales was unverifiable and there being no evidence produced by the assessee to show that any expenditure other than purchases was actually incurred by the assessee for making such unaccounted sales separately, the application of higher profit rate to estimate the income of the assessee from the unaccounted sales is fully justified. Keeping in view the submissions made by the ld. Representatives of both the sides and having regard to the facts of the case, I am of the view that it would be fair and reasonable to apply a profit rate of 4% to estimate the income of the assessee from the unaccounted sales of Rs.2,39,30,000/-. I accordingly modify the impugned order of the ld. CIT(Appeals) on this issue and direct the Assessing Officer to restrict the addition on this issue by applying a profit rate of 4% to the undisclosed sales of the assessee.