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Income Tax Appellate Tribunal, DELHI BENCH “SMC”, NEW DELHI
Before: SHRI H.S. SIDHU
ORDER The Assessee has filed the present appeal against the impugned order dated 29/7/2016 passed by the Ld. Commissioner of Income Tax (Appeals), Muzaffarnagar on the following grounds:-
That the order is against law and facts on the record.
2. Ld. CIT(A) was wrong in confirming proceedings u/s. 148
without any reason to believe.
3. Ld. CIT(A) was wrong in confirming addition of Rs.
11,90,000/- without any base.
4. That Ld. CIT(A) was wrong in considering the cash deposit
without any base.
The brief facts of the case are that the assessee filed the original return on 13.3.2010, declaring income of Rs. 1,46,643/. Subsequently, it came through AIR information that the assessee has deposited cash of Rs. 11,50,000/- in his saving bank account in Punjab National Bank, Haripur Branch, Dehradun. Therefore, a notice u/s. 148 of the I.T. Act, has been issued to the assessee on 1.3.2013. Various notices u/s. 142(1) dated 20.12.2013, 5.1.2013 and 12.2.013 have been issued. In response to the said notices assessee filed written submission in which he stated that he original return filed on 31.3.2010 may be treated in response to the notice u/s. 148 of the Act dated 1.3.2013, declaring income of Rs. 1,46,643/-. Accordingly, notice u/s. 143(2) and notice u/s. 142(1) alongwith questionnaire were sent through speed post to the assessee. In response to notice u/s. 142(1), the A.R. of the assessee attended the proceedings from time to time and furnished requisite papers and documents / information. AO observed that assesee did not maintain any books of account. AO further observed that assessee has shown total sales of Rs. 9,61,579/- and net profit of Rs. 1,54,900/- which gives NP rate 16.10%. Considering the locality of the surrounding area assessee sales shown lower side. Therefore, the AO estimated the sale of the assessee at Rs. 11,20,000/- for assessment year 2009-10 and after applying net profit rate @16.10%, net profit works out to Rs. 1,80,320 and made the addition. The assessment was completed u/s. 143(3) of the I.T. Act, 1961 vide order dated 28.3.2014 at Rs. 14,82,060/-.
Aggrieved with the aforesaid order dated 28.3.2014, assessee filed the Appeal before the Ld. CIT(A), who impugned order dated 29.7.2016 has partly allowed the appeal of the assessee.
Against the aforesaid order dated 29.7.2016 passed by the Ld. CIT(A), assessee is in appeal before the Tribunal.
At the time of hearing ld. Counsel of the assessee has stated that AO estimated sales of Rs. 11,20,000/- as against Rs. 9,61,579/- as per order of Commercial Tax dated 29.2.2012 and he applied NP rate of 16.10% and net profit works out to Rs. 1,80,320/- as against Rs. 1,54,900/- shown by the assessee and thus an addition of Rs. 25,420/- was made by him. He further stated that AO also added Rs. 13,10,000/- being deposits in banks which is not valid as when the account books are rejected then he has taken care of everything. He further stated that it is settled law that when the gross profit/net profit is applied, that would take care of everything and there was no need for the AO to make scrutiny of the amount incurred on the purchase made by the assessee. Therefore, he requested that the addition in dispute may be deleted and appeal of the assessee may be allowed. To support his contention he relied upon the various case laws:-
- CIT vs. Banwari Lal Banshidhar (229 ITR 229-All)
On the other hand, Ld. DR relied upon the order passed by the revenue authorities and opposed the request of the ld. Counsel of the assessee.
I have heard both the parties and perused the relevant records especially the order passed by the Revenue Authorities. In this case, the AO estimated sales of Rs. 11,20,000/- as against Rs. 9,61,579/- as per order of Commercial Tax dated 29.2.2012 and he applied NP rate of 16.10% and net profit works out to Rs. 1,80,320/- as against Rs. 1,54,900/- shown by the assessee and thus an addition of Rs. 25,420/- was made by him. I further find that AO also added Rs. 13,10,000/- being deposits in banks which is not valid as when the account books are rejected. I further note that the Hon’ble Allahabad High Court in the case of CIT vs. Banwarilal Banshidhar reported in 229 ITYR 0229 has held as under:-
“When income of the assessee was computed applying the gross profit rate and when no deduction was allowed in regard to the purchases of the assessee, there was no need to look into the provisions of s. 40A(3) and r. 6DD(j). No disallowance could have been made in view of the provision of section 40A(3) r/w r. 6DD(j) as no deduction was allowed to and claimed by the assessee in respect of the purchase. When gross profit rate is applied, that would take care of everything and there was no need for the AO to make scrutiny of the amount incurred on the purchases by the assessee.”
In the background of the aforesaid discussions and respectfully following the precedent as aforesaid, I am of the considered view that action of the AO in making the addition in dispute and confirmation thereof by the Ld. CIT(A) is contrary to law and hence, I delete the addition in dispute and allow the appeal of the assessee.
In the result, the appeal of the Assessee is allowed.
Order pronounced in the Open Court on 03/03/2017.