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Facts
The assessee's appeal was filed 181 days late, but the delay was condoned due to plausible reasons. The assessment year under review is 2017-2018. The AO had rejected the assessee's books of accounts and estimated income at 1.5% of turnover, also making an addition for cash deposited during demonetization.
Held
The Tribunal held that the addition for cash deposited during demonetization was not justified as the assessee had sufficient cash balance and the bank confirmed no demonetized currency was deposited. For estimating income, the Tribunal referred to a prior year's estimation of 0.39% but directed estimation at 1% for the current year to avoid affecting assessed income below returned income.
Key Issues
Whether the addition for cash deposit during demonetization is justified and how to estimate the assessee's income when books are rejected.
Sections Cited
140
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Income Tax Appellate Tribunal, “SMC” BENCH CUTTACK
Before: SHRI GEORGE MATHAN
(िनधा�रण वष� / Assessment Year : 2017-2018) Madan Lal Gupta Vs ITO, Bhadrak Ward, Bhadrak Near Charampa College, Tishalpur, Rahanja, Charampa, Bhadrak, 756101 PAN No. : ACXPG 7862 M (अपीलाथ� /Appellant) .. (��यथ� / Respondent) िनधा�रती क� ओर से /Assessee by : Shri B.R. Panda, AR राज�व क� ओर से /Revenue by : Shri Vijay Singh, Sr. D.R. सुनवाई क� तारीख / Date of Hearing : 23/09/2025 घोषणा क� तारीख/Date of Pronouncement : 23/09/2025 आदेश / O R D E R This is an Appeal Filed by the assesee against the order of the Ld.CIT(A), National Faceless Appeal Centre(NFAC),Delhi dated 18/10/2024 passed in Appeal No.CIT(A),Cuttack/10541/2019-20 for the assessment year 2017-2018.
At the outset, it is found that the appeal of the assessee is barred by 181 days. In this regard, the assessee has filed an affidavit stating sufficient reasons for condonation of delay, which are plausible and not found to be false. Ld.Sr. DR also did not raise any serious objection to condone the delay. Accordingly, the delay of 181 days in filing the appeal by the assessee is condoned and the appeal of the assessee is admitted for hearing.
It was submitted by the Ld. AR, that there are two additions. It was the submission that the assesee is a wholesale dealer of Britannia Biscuits. It was the submission that in the course of assessments the books of accounts of the assesee was rejected and the income of the assesee was estimated at 1.5% of the total turnover. It was the submission that the AO had proposed an addition by treating the NP at 5% but had made the addition @ 1.5%. It was the submission that the net profit of the assesee disclosed during the impugned assessment year, is 0.62%. It was submission that the coordinate bench of this Tribunal in the assessee’s own case for the assessment year 2009-10, has estimated the income of the assesee at 0.39%. It was the submission that the income of the assesee disclosed @ 0.62% may be accepted. It was the further submission that in the course of assessment, the AO has further made an addition of the cash deposited in the bank account of the assesee during the demonetization period. It was the submission that the assesee had a cash balance as on 09.11.2016 of Rs.15,50,000/- out of which the assesee had deposited Rs.15,45,000/-.
The Ld.AR, drew my attention to the cash book of the assesee which shown the cash balance as on 09.11.2016 at Rs.15,50,000/-. It was further submission that the addition was made in respect of the cash deposited in the books of account of reassessed on 05.12.2016. It was the submission that the bank of the assesee has given a categorical letter wherein it is shown that no demonetized currency has been deposited by the assesee in its bank account on 05.12.2016. It was a prayer that the addition may be deleted.
In reply the Ld. Sr. DR submitted that in respect of the NP the AO admittedly had proposed 5% but had estimated the income of the assessee at 1.5%. It was a prayer that the same may be accepted. In respect of the cash deposited in the bank account, it was vehemently supported the order of the AO and CIT(A).
I have considered the rival submissions. A perusal of the facts of the present the case clearly shows that the assesee has adequate cash balance in his cash book for making the deposits in the bank account. In respect of the addition proposed for the date of 05.12.2016 the letter from the bank clearly shows that no demonetized currency has been deposited by the assesee on the said date. In any case, the books of accounts of the assessee having been rejected, obviously no addition can be made in respect of the transactions which are recorded in the books of accounts. Consequently, the addition made in respect of the alleged demonetized currency deposited in the bank accounts stands deleted.
Coming to the issue of the estimation of the income of the assesee I find that for the assessment year 2009-10 the Income Tax Appellate Tribunal (ITAT) in assessee’s own case has estimated the income of the assesee at 0.39% by considering the fact that the Comparative percentages for the earlier years was varying between 0.25 and 0.45%. For the impugned assessment year, admittedly, the percentage of profit is 0.62%. Obviously the facts for the assessment year 2009-10 cannot be applied to this year, in so far as if the same is applied the provisions of section 140 of the Act would get affected as the assessed income would go below the returned income. This being so, in the interest of justice it is directed that the income of the assesee be estimated @ 1% against 1.5% estimated by the AO.
In the result, appeal of the assesee is partly allowed for the statistical purposes. Order dictated and pronounced in the open court on 23/09/2025.