BRAJGOPAL GUPT,DABRA vs. IT, GWALIOR

The Ld. CIT(A), at para 10.6, observed that the cash withdrawals were made out of amount received by the assessee by way of RTGS / NEFT. The credit transactions were out of trading activities and therefore, cash withdrawals were out of trading receipts only. The Ld. AO observed that the assessee made cash deposits of Rs.50.30 Lacs and made cash withdrawals of Rs.406.66 Lacs. Since the source of withdrawals was out of trading receipts, the same could not be added to the income of the assessee. Accordingly, the addition of Rs.406.66 Lacs was deleted whereas addition of cash deposit for Rs.50.30 Lacs was sustained. The adjudication of Ld. CIT(A) has led to cross-appeals before us.

The factual findings as rendered by Ld. CIT(A) remain uncontroverted before us. It is the finding of Ld. CIT(A) that cash withdrawals were out of trading receipts. However, the income from trading activities has not been estimated. Therefore, we estimate the same at 5% of withdrawals of Rs.406.66 Lacs. The addition of cash deposit for Rs.50.30 Lacs is sustained since the assessee has failed to establish the sources thereof. The addition as sustained by us would be subjected to normal rate of tax in terms of decision of Hon’ble High Court of Madras (Madurai Bench) in S.M.I.L.E. Microfinance Ltd. vs. ACIT (WP (MD) No.2078 of 2020 dated 19-11-2024) holding that the revenue is empowered to impose 60% rate of tax for the transactions from 01.04.2017 onwards and not prior to the said cut-off date. The Ld. AO is directed to re-compute the income of the assessee. The cross-appeals stand partly allowed accordingly.

Against quantum addition of Rs.13.97 Lacs, Ld. AO levied penalty of Rs.1.19 Lacs vide its order dated 20-07-2023, For quantum addition of Rs.456.96 Lacs, Ld. AO levied penalty u/s 271AAC(1) for Rs.27.41 Lacs. The same was confirmed by Ld. CIT(A). Aggrieved, the assessee is in further appeal before us.

Considering our view in quantum appeal wherein we have estimated the income of the assessee and relied on the cited decision of Hon’ble High Court holding that the income would be subjected to normal rate of tax, we would hold that it is not a fit case for levy of impugned penalties. When the income is estimated, the same would not automatically lead to a conclusion that the assessee concealed its particulars of income. By deleting both the penalties, we allow the appeal of the assessee.

In the result, & stand partly allowed. ITA Nos.247 & 248/Agr/2024 stand allowed. Order pronounced u/r 34(4) of Income Tax (Appellate Tribunal) Rules, 1963.