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Facts
The assessee's appeal is against the order for assessment year 2015-16. The Assessing Officer accepted a portion of the credits in the assessee's bank accounts but disallowed the remaining amount, considering it not acceptable for want of evidence. The assessee's main business is buying and selling flowers and agricultural produce.
Held
The Tribunal found that the assessee had provided sufficient details of the credit entries, and the Assessing Officer did not conduct a proper examination. The Tribunal decided that the balance amount should be treated as business income and adopted an 8% rate on it.
Key Issues
Whether the denial of the claim for sale of agricultural produce by the Assessing Officer for want of evidence was justified, and if the remaining credits in the bank account could be treated as business income.
Sections Cited
44AD of the Act, 69A of Act
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Before: Shri Inturi Rama Rao & Shri S.S. Viswanethra Ravi
O R D E R
PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER:
This appeal filed by the assessee is directed against the order dated 23.09.2025 passed by the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [NFAC], Delhi for the assessment year 2015-16.
At the outset, we find that out of total credits reflected in bank accounts of ₹.76,95,084/- and the Assessing Officer accepted the explanations offered by the assessee for the sources for credits to an extent of ₹.23,17,258/- relates to sale made during the year under consideration. For remaining balance amount of ₹.55,77,826/-, the explanations offered by the assessee are discussed by the Assessing Officer from page 18 to 21 of the assessment order, wherein, he has noted that the assessee claimed wrong entries/reversal entries of sale proceeds on agricultural produce, advance received from buyers, details of loan, accumulated earning, but, however, the Assessing Officer rejected the submissions of the assessee as not acceptable for want of evidences. The assessee contested to apply 8% to the balance amount before the ld. CIT(A), but, however, no consideration was given and confirmed the order of the Assessing Officer vide para 3.4.1 of the impugned order.
The ld. AR Shri R. Venkataraman, C.A. before us requested to apply 8% on the remaining balance amount and allow the ground of appeal. On perusal of the assessment order and submissions made by the assessee, which are reproduced in page 2 to 9 of the impugned order, the ld. AR submits that all the details of credit entries in assessee’s bank accounts were furnished to the Assessing Officer and drew our attention to page 11 of the assessment order. He submits that all the credit entries of bank account constitute the payment received by the assessee for sale of flowers, which were directly deposited into the assessee’s bank account by the buyer. He further submits that cash deposits were also made by the debtors in assessee’s bank account for sale of flowers during earlier financial years. Further, sale proceeds of agricultural produce sold for the year under consideration and also for earlier years were credited. He argued that the advance deposits were made by buyers into the assessee’s bank account of the assessee on account of sale of flowers and agricultural produce. Further, loan borrowed by the assessee and deposits of accumulated earnings of assessee and his wife, savings bank account interest, wrong entry posted by bank and reversed subsequently were reflected in the credit entries. The ld. AR drew our attention the assessment order from pages 13 to 21 and submits that every supporting detail for the above were furnished to the Assessing Officer by way of tabular form, which is evident from page 13 to 21 of the paper book. He argued vehemently that there was no adverse inference drawn by the assessing Officer regarding details of credits as found in the assessee’s bank account, but, added entire cash credits in the absence of supporting evidences and for want of reconciliation. He submits that the said cash credits are business receipts even though requested to adopt same 8%, the Assessing Officer has ignored the same. The ld. AR prayed to treat the same as business receipt and adopt 8% on the same.
The ld. DR Shri SBR Kumar Laghimsetti, Addl. CIT relied and supported the order of the ld. CIT(A).
Heard both parties and perused the material on record. We find the vehement contention of the ld. AR that all the details with reference to credit entries were furnished to the Assessing Officer which is evident from page number 13 to 21 of the assessment order. We find at page 13 of the assessment order in table 1 provided reconciliation statement of turnover and sundry debtors and according to the ld. AR, it was contented that the total receivables as on 31.03.2015 is ₹.13,92,320/-. Further, another reconciliation statement under table II furnished along with the return of income, wherein, it was stated that there was no difference in respect of turnover declared and turnover as per the statement. Further regarding agriculture produce, it was shown loss during the year under consideration. We note the assessee contended that an amount of ₹.23,17,258/- are relating to sales for the year under consideration and accordingly the Assessing Officer accepted the same. Further, for the remaining amount of ₹.53,56,791/-, it was contended that the debtors made deposits with reference to sales to earlier financial years to an extent of ₹.15,13,000/-. But, however, the Assessing Officer did not accept the explanation of the assessee for want of evidence which is clear from page 19 of the assessment order. Further, the assessee has claimed the sale proceeds of agriculture produce to an extent of ₹.14,32,000/- for the year under consideration. The Assessing Officer found the claim is not acceptable for having no evidence with reference to the sale of agricultural produce. We find that as contented by the ld. AR that the assessee’s main business is buying and selling of flowers and agricultural income from 30 acres of agricultural land owned by the assessee and his relatives and we find no adverse findings recorded by the Assessing Officer with reference to holding of agricultural land, but, however, denied the claim of sale of agricultural produce for want of details of sales. We find no examination or whatsoever verification effected in this regard by the Assessing Officer, in the absence of which denial of claim of sale of agriculture produce is not justified. Further, the sale proceeds of agricultural produce of earlier years were also furnished before the Assessing Officer to an extent of ₹.8,37,000/- and likewise, details relating to advance received from buyers, loan borrowed, accumulated earnings during earlier years were also furnished and the explanation offered by the assessee were not found acceptable to the Assessing Officer which is evident from pages 20 & 21 of the assessment order. The ld. AR contended all the details in respect of balance amount were furnished relating to the business activity of the assessee and the addition made under 69A of Act, is not justified. We find that the same issue was raised before the ld. CIT(A), but, however, the ld. CIT(A) held the same are not related to business activity of the assessee vide his finding at para 3.4.1 of the impugned order. We find that the assessee filed written submissions on merits which are reproduced specifically at pages 5 to 9 of the impugned order. On perusal of the same and with the details furnished before the Assessing Officer, we note that that no examination whatsoever conducted by the Assessing Officer and the ld. CIT(A) and at the same time, we find no adverse finding also with reference to the written submissions of the assessee before the Assessing Officer, therefore, we find no reason for denial of claim of application as provided under section 44AD of the Act to the balance amount of ₹.53,56,791/- as it is relating to the business activity of the assessee.
Therefore, we are of the considered view that the assessee explained to every entry made in the tabular form reflected at pages 18 to 21 of the assessment order and taking into account the assessment year being ten years old, and peculiar facts of the case, it would be appropriate to treat the balance amount of ₹.53,56,791/- as business income and to adopt 8% on the said balance amount of ₹.53,56,791/-. Accordingly, the Assessing Officer is directed to compute 8% on the said balance amount. Thus, the ground Nos. 5 to 10 & 13 raised by the assessee are allowed. The ground No. 1 to 4 raised by the assessee become academic and ground Nos. 11, 12, 14 & 15 are consequential in nature requires no adjudication.
In the result, the appeal filed by the assessee is allowed. Order pronounced on 25th February, 2026 at Chennai.