MUZAFAR AHMAD SHAH,ANANTNAG vs. INCOME TAX OFFICER WARD, ANANTNAG
Facts
The assessee, a trader in cement and iron, filed an appeal for AY 2017-18 against a best judgment assessment made u/s 144, with a significant delay of 893 days which was condoned by the Tribunal. The Assessing Officer had estimated business income at 8% profit on certain deposits and treated other cash deposits as unexplained, a decision largely upheld by the CIT(A) but contested by the assessee. The core dispute revolved around the appropriate profit rate and the classification of cash deposits as business receipts or unexplained money.
Held
The Tribunal held that a profit rate of 6% should be applied on the entire receipts of Rs.171.36 Lacs, noting that the business dealt with highly competitive commodities and that cash deposits should not be bifurcated as the sole source was business receipts. Consequently, it directed the Assessing Officer to re-compute the income, clarifying that the separate addition of unexplained cash deposits was not justified.
Key Issues
Condonation of delay in filing appeal; determination of appropriate profit rate for a trading business under best judgment assessment; and the justification of treating cash deposits as unexplained money versus business receipts.
Sections Cited
Section 144
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH, AMRITSAR
IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AMRITSAR PHYSICAL HEARING HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकर अपील सं. / ITA No.215/ASR/2025 (निर्धारण वर्ा / Assessment Year: 2017-18) Muzafar Ahmad Shah ITO बिधम/ Vs. Kabmarg Larkipora Post Office Building Anantnag (J&K) – 192101 J & K 192101 स्थायीलेखासं./जीआइआरसं./PAN/GIR No. ECDPS-5584-J (अपीलाथी/Appellant) : (प्रत्यथी / Respondent) अपीलाथीकीओरसे/ Appellant by : Shri Vaseem Ahmad (CA) – Ld. AR प्रत्यथीकीओरसे/Respondent by : Sh. Charan Dass (Addl. CIT) – Ld. Sr. DR सुनवाईकीतारीख/Date of Hearing : 17-12-2025 घोषणाकीतारीख /Date of Pronouncement 17-12-2025 : आदेश / O R D E R 1. Aforesaid appeal by assessee for Assessment Year (AY) 2017-18 arises out of an order of learned Commissioner of Income Tax (Appeals), NFAC [CIT(A)] dated 14-07-2022 in the matter of an assessment framed by Ld. Assessing Officer [AO] on best judgment basis u/s 144 of the Act on 18-12-2019. The registry has noted delay of 893 days in the appeal, the condonation of which has been sought by Ld. AR on the strength of condonation petition along with supporting documents. It has been stated that the delay has happened due to adverse medical conditions being faced by assessee’s family members. Keeping in mind the guiding principles laid down by Hon’ble Apex Court in the case of Collector,
Land Acquisition vs. Mst. Katiji & Ors. (1987; (2) TMI 61 SC), I condone the delay and proceed with adjudication of appeal on merits. The Ld. AR has prayed for fair estimation of the profits. The Ld. Sr. DR pleaded for dismissal of the appeal. 2. From assessment order, it could be seen that the assessee did not file its return of income. The assessee was engaged in trading of cement and iron. The assessee’s bank account had credit of Rs.171.36 Lacs. The Ld. AO applied profit rate of 8% on deposit of Rs.161.32 Lacs (other than cash deposits) and computed business income of Rs.12.90 Lacs. The cash deposits of Rs.10.03 Lacs were treated as unexplained money and separately added to the income of the assessee. 3. During first appeal, it was stated by the assessee that it earned profit rate of less than 4% in subsequent years. However, this plea was rejected by Ld. CIT(A) and profit rate of 8% was confirmed. Out of deposit of Rs.10.03 Lacs, half of the deposits were treated as unexplained cash deposits and on the remaining half of the deposits (i.e., for Rs.5.01 Lacs), Ld. AO was directed to compute business profit of 8%. Still aggrieved, the assessee is in further appeal before us. 4. It is undisputed fact that the assessee is engaged in trading of cement and iron which is highly competitive commodities. Secondly, there is no rational for bifurcating the cash deposits into two parts since the only source of deposits for the assessee are business receipts. Considering the facts of the case, I direct Ld. AO to apply profit rate of 6% in entire receipts of Rs.171.36 Lacs and re-compute the income of
the assessee. The separate addition of unexplained cash deposit is not justified. 5. The appeal stands partly allowed. Order pronounced on 17th December, 2025.
Sd/- (MANOJ KUMAR AGGARWAL) ACCOUNTANT MEMBER Dated: 17-12-2025 आदेश की प्रनिनलनप अग्रेनर्ि /Copy of the Order forwarded to : 1. अपीलाथी/Appellant 2. प्रत्यथी/Respondent 3. आयकरआयुक्त/CIT 4. ववभागीयप्रवतवनवि/DR 5. गार्डफाईल/GF ASSISTANT REGISTRAR
ITAT AMRITSAR
