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Facts
The assessee filed an appeal with a delay of 22 days, attributing it to post-menopausal bleeding and bed rest advised by a doctor. The Assessing Officer (AO) noted unexplained cash deposits during demonetization and added them under section 68. For other deposits, a net profit rate of 8% was applied. The CIT(A) provided some relief on the section 68 addition but upheld the 8% net profit rate on the consolidated turnover.
Held
The Tribunal acknowledged the justification for applying a net profit rate in the absence of books of accounts. However, it found the 8% rate to be on the higher side and restricted it to 6% of the total turnover, granting consequential relief to the assessee.
Key Issues
Whether the net profit rate of 8% applied by the lower authorities is justified, or if a lower rate should be applied given the circumstances.
Sections Cited
68 of the Income Tax Act, 1961
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “CUTTACK BENCH”,
Appearances by: Assessee represented by : N. Anand Rao, CA Department represented by : S.C. Mohanty, Sr. DR Date of concluding the hearing : 29.04.2025 Date of pronouncing the order : 21.05.2025 O R D E R
PER SANJAY AWASTHI, ACCOUNTANT MEMBER
In this case, there is a delay of 22 days in filing of the said delay, the appellant has filed an affidavit seeking condonation of the said delay as under:
“I, Lina Mohanty, aged about 52 years W/O- Sri Gajendra Mohanty of village/ Post- Balimela (Driver Line), P.S- Orkel, Dist- Malkangiri do hereby solemnly affirm and state on oath as under:-
1. 1. That, I am the deponent and well acquainted with the facts of this affidavit.
2. That, I was suffering from Post menopausal bleeding for a period from 25-01-2025 to 24-02-2025.
3. That, as per the advice of the concerned Doctor I was in complete bed rest for the above period. That, the medical certificate is enclosed herewith for proof of my health condition.
Lina Mohanty 4. That, I swear this affidavit in order to produce before the Hon'ble Income Tax Appellate Tribunal in connection with Income Tax matters. 5. That, the facts stated above are true to the best of my knowledge and believe and I conceal nothing.” 1.1 Considering the reasons given in the said affidavit, the delay is hereby condoned and the appeal is admitted for adjudication.
The present appeal arises from order u/s 250 of the Income Tax Act, 1961 (hereinafter “the Act”), passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereafter “the Ld. CIT(A)”] vide order dated 30.11.2024 for AY 2017-18.
2.1 In this case, the Ld. AO is seen to have asked the assessee to produce books of accounts etc. but the same was not produced. The Ld. AO has recorded a finding that there was cash deposit of Rs. 35,71,500/- during demonetisation period but during the assessment proceedings, the source of such cash deposit was not explained and thereafter the Ld.AO invoked the provision of section 68 of the Act on this amount. Regarding the remaining amount of deposits (comprising of both cash and cheques) of Rs. 4,03,69,879/-, they were subjected to a net profit rate of 8% leading to an addition of Rs. 32,29,590/-.
2.2 The Ld. CIT(A) is seen to have called for a remand report and given some relief to the assessee with respect to the addition made of Rs. 35,71,500/- u/s 68 of the Act by holding that this amount also represents the business receipts of the assessee. However, on the consolidated turn over of Rs. 4,39,41,379/- the Ld. CIT(A) directed that a net profit rate of 8% should be applied.
2.3 Aggrieved with this action of the Ld. CIT(A), the assessee approached the ITAT challenging this action of Ld. CIT(A) in applying 8% for computing the net profit.
Before us, the Ld. AR stated that all the facts were before the Ld. CIT(A) to enable him to take a reasoned view on the issue of computing the 3.1 The Ld. DR, on the other hand, relied on the orders of authorities below and stated that in the absence of books of accounts and other documents before the Ld. AO, the estimation of net profit is justified.
We have considered the rival submissions and we find that in the absence of books of accounts and other related documents there is a justification in principle for applying a net profit rate. However, we find that the net profit percentage of 8% is on the higher side and we restrict it to 6% of the total turnover of Rs. 4,39,41,379/-. The assessee gets consequential relief. It may be mentioned that both the Ld. AR and DR were aggregable to the application of 6% on the turn over for estimating the net profit in this case.
In result, appeal of the assessee is partly allowed.
Order pronounced on 21.05.2025