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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: MS.ANNAPURNA GUPTA & T.R. SENTHIL KUMAR
आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद �यायपीठ आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण अहमदाबाद �यायपीठ अहमदाबाद �यायपीठ ‘SMC’ अहमदाबाद। अहमदाबाद �यायपीठ अहमदाबाद। अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD (Conducted Through Virtual Court) ] ] BEFORE MS.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND T.R. SENTHIL KUMAR, JUDICIAL MEMBER
ITA No.1263/Ahd/2019 Assessment Year :2011-12 Mayankumar Babulal Saini ITO, Ward-2 B/204, Manibhadra Enclava Vs Palanpur. Nr.Rajasthan Hospital Shahibaug Ahmedabad 380004. PAN : CPOPS 2747 R अपीलाथ�/ (Appellant) �� यथ�/(Respondent) Assessee by : Shri Chetan Agarwal, AR Revenue by : Shri Kamlesh Makwana, DR सुनवाई क� तार�ख/Date of Hearing : 10/02/2022 घोषणा क� तार�ख /Date of Pronouncement: 22/02/2022 आदेश/O R D E R PER T.R. SENTHIL KUMAR, JUDICIAL MEMBER: This appeal is filed by the assessee against the orderdated 25.5.2019passed by the Ld.Commissioner of Income-tax (Appeals)-4, Ahmedabad [for short “Ld.CIT(A)] relating to the assessment year 2011-12.
Grounds of appeal and additional grounds raised by the assessee are as follows:
“1. The Ld.CIT erred in law as well as on facts in confirming of Rs.3,28,298 made by Ld.AO by estimating gross profit at Rs.6,00,000 on sale of Rs.27,37,682 against gross profit of Rs2,71,720 disclosed by the assessee.
ITA No.1263/Ahd/2019 2 2. The ld.CIT erred in law as well as on fact in confirming rejection of books of accounts made by Ld.AO.
Ld.AO has erred on law as well as on fact in reopening assessment u/s.147 based on vague reasons for reopening without any reason to believe for escapement of income.”
Additional Ground of appeal:
“Ld.AO erred in law as well on fact in rejecting the books of accounts and estimating gross profit, whereas case was reopened for reason for cash deposited in bank account for which no addition was made. He ought to have not made addition on any other issue when reason for reopening ceased to survive.”
Brief facts of the case is that the assessee is an individual and engaged in the business of vegetables sales and purchases it from local farmers. The assessee has not filed his return of income. The assessee has made cash deposits in State Bank of India of Rs.10,47,574/-.Therefore, the assessment was reopened under section 147 of the Income Tax Act, 1961 (hereafter referred to as “the Act”) by issuing a notice under section 148 on 24-03-2018. In response thereto, the assessee has filed his return on 14.5.2018 declaring a loss of Rs.1,45,250/- for the Asstt.Year 2011-12. The AO issued notice under sections 143(3) and 142(1) on various dates and completed the reassessment. The assessee claimed that the Sales of vegetables during the year was Rs.27,30,682/- against which gross profit of Rs.2,71,702/= and declared net profit of Rs.1,45,250/= which worked out as 5.32%. But the AO was not satisfied with the books of accounts and rejected the same and estimated Gross Profit at Rs.6,00,000/- and determined net profit as Rs.4,73,550/- which works out to 17.34%.
ITA No.1263/Ahd/2019 3 4. Aggrieved against the re-assessment order, the assessee has challenged the same before the Ld.Commissioner of Income Tax (Appeals)-IV, Ahmedabad. The Ld.CIT(A) held that facts remained that the cash deposited in bank account could not be explained fully by the assessee, even if credit for the agro-trade was granted. Therefore, the Ld.CIT(A) confirmed the addition made by the AO and dismissed the assessee’s appeal.
Aggrieved against this impugned order, the assessee is in appeal before the Tribunal raising grounds as well as additional grounds of appeal. The Ld.AR of the assessee took us to the reasons recorded by the AO for reopening of the assessment, which has been extracted by the Ld.CIT(A) in his impugned order in para-3.The Ld.AR also submitted that as per section 149, the AO has not quantified what is the amount of income escaped from the assessment and during the course of reassessment proceedings, he had only estimated the income and made disallowance therein. Therefore, the entire reopening of the assessment is bad in law and relied upon the few judgments to support his case.
Per contra, the ld.DR submitted that the reopening of the assessment is good in law, since the assessee has not filed the original Return of Income u/s.139 and for the first time filed the Return in response to 148 notice, therefore the income is escaped from assessment. Further the addition/estimation made by the AO is after rejection of books which are confirmed by the Ld.CIT(A) and therefore reassessment does not require any interference, and prayed to confirm the orders of the lower authorities.
ITA No.1263/Ahd/2019 4 7. We have perused records placed before us including paper book filed by the assessee. Admittedly in this case the assessee had not filed his regular Return of Income under section 139 of the Act. When assessment was reopened by issuing notice under section 148 after 4 years but within 6 years period, the assessee filed his Return declaring a loss of Rs.1,45,250/= on 14-05-2018. The ld.AO has recorded reason that undisclosed income on account cash deposits of Rs.10,47,574/- in State Bank of India has escaped assessment. In the reassessment order the AO has held that in the absence of corroborative evidence book results disclosed by the assessee is rejected, and Gross Profit is estimated at Rs.6.00 lakhs. After considering the GP disclosed by the assessee at Rs.2,71,702/- remaining amount of Rs.3,28,298/- added to the total income of the assessee. Therefore the reassessment cannot be said to be bad in law and the additional Grounds of Appeal raised by the assessee is hereby rejected.
The Ld.AR submitted that the estimation of Gross profit at Rs.6,00,000/- which works out to 17.34% is made by the AO is without making any comparative study and is only a rough estimation without any basis and therefore the same is liable to be deleted. Alternatively the AR submitted that the Ld AO ought to have applied section 44AD of the IT Act, which provides for net profit rate at 8% only even in the absence of maintenance of Books of accounts. We find that there is considerable force in the submission of the LdAR, since the AO has estimated the Gross Profit without making any comparative study of similar nature of trade activities, therefore the estimation of Rs.6 lakhs made by the AO is not sustainable in law. However considering that the estimation of income made by the AO at 17.34% is found to be excessive and the assessee declared the
ITA No.1263/Ahd/2019 5 Net profit at 5.32%, we find that it is appropriate to estimate the Net profit at 8% as more reasonable in the facts and circumstances of the case. Thus, we direct the Ld AO to rework the same and pass appropriate order. Thus the appeal filed by the assessee is partly allowed.
Before part with the matter, we observe here that the above case and/or estimation decided upon by us is based on the peculiar facts of the case and nature of vegetable trade carried out by the assessee, and therefore, this decision shall not be treated as a binding precedent in other cases.
In the result, appeal of the assessee is partly allowed.
Order pronounced in the Court on 25th February, 2022 at Ahmedabad.
Sd/- Sd/- (ANNAPURNA GUPTA) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad, dated 25/02/2022