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Facts
The assessee, a dealer in Kerosene oil, deposited Rs. 22,95,617/- in cash during the demonetization period. The assessee did not file any return of income. The Assessing Officer (AO) reopened the assessment and made additions for the cash deposits and estimated net profit. The CIT(A) confirmed both additions.
Held
The Tribunal held that the cash deposit of Rs. 22,95,617/-, including SBN notes of Rs. 8,90,000/-, was a business receipt, and since the AO did not provide material to suggest otherwise, the addition was deleted. However, the addition for estimated net profit at 8% under Section 44AD was confirmed as the assessee had not filed returns.
Key Issues
Whether the cash deposit during demonetization was a business receipt and whether the net profit estimation by the AO was justified.
Sections Cited
148, 44AD
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘D’ BENCH: CHENNAI
Before: SHRI SS VISWANETHRA RAVI & SHRI JAGADISH
M/s. Appa Trading Company, The Income Tax Officer, No.130, Suramangalam Main Vs. Ward-1(1), Road, Leigh Bazar, Salem. Salem – 636 009. [PAN: AAQFA 3732M] (अपीलाथ�/Appellant) (��यथ�/Respondent) अपीलाथE की ओर से/ Appellant by : Shri S. Sridhar, Advocate (Erode) GHथE की ओर से /Respondent by : Shri Vinod, JCIT सुनवाई की तारीख/Date of Hearing : 21.08.2024 घोषणा की तारीख /Date of Pronouncement : 20.09.2024 आदेश / O R D E R PER JAGADISH, A.M : Aforesaid appeal filed by the assessee for Assessment Year (AY) 2017-18 arises out of the order of Learned Commissioner of Income Tax, National Faceless Appeal Centre (NFAC), Delhi [hereinafter “CIT(A)”] dated 29.04.2024.
The only effective ground in this appeal of assessee is against confirming the addition of cash deposit during demonetization period of :- 2 -:
Rs. 22,95,617/- and estimating the net profit @ 8% and making addition of Rs. 18,66,596/-.
The brief facts of the case are that the assessee is a dealer in Kerosene oil with HPCL and has deposited cash of Rs. 22,95,617/- in the Salem District Co-operative Bank Ltd., Salem. The assessee has not filed any return of income. The A.O therefore, has reopened the assessment and made the addition of cash deposits of Rs. 22,95,617/- during demonetization period and also made addition @8% of credit in the bank, taking them business receipts as business income. The Ld. CIT(A) has confirmed both the additions.
The Ld. Authorized Representative (A.R) of the assessee has argued that the assessee is a dealer in Kerosene oil with HPCL and therefore, was authorized to accept SBN notes during the demonetization period. The Ld. AR has also argued that the entire cash deposit was a business receipt and only Rs. 8,90,000/- of SBN notes as against Rs. 22,95,617/- alleged by the A.O deposited during the demonetization period. Therefore, the Ld. CIT(A) was not justified to confirm the above addition. As regards to estimation of net profit margin @ 8%, the Ld. AR has submitted that the profit adopted by the :- 3 -:
A.O is excessive as there is hardly margin of less than 2% in the line of business.
The Ld. Departmental Representative, on the other hand, supported the orders of the authorities below.
We have heard the rival submissions, and perused the materials available on record. The assessee had deposited Rs. 22,95,617/- during demonetization period which included SBN notes of Rs.8,90,000/-. The assessee was a dealer in Kerosene oil with HPCL and therefore, was authorized to accept the cash notes during demonetization period. The A.O has not brought out any material to suggest that cash deposit during demonetization period was not cash sale which is in l ine with cash deposit in rest of period. Therefore, the addition confirmed by Ld. CIT(A) cannot be sustained and upheld and therefore, deleted.
As regards to estimation of net profit @ 8%, the assessee has not neither filed return u/s. 148 of the Act nor filed return in response to notice u/s 148 of the Act. The A.O has estimated the net profit rate @ 8%, which the rate prescribed in Section 44AD of the Act. There is no :- 4 -: infirmity in the order of A.O and Ld. CIT(A) in confirming the net profit rate @ 8%. Thus, the addition made by Ld. CIT(A) is confirmed.
In the result, the appeal filed by the assessee is partly allowed.
Order pronounced on 20th September, 2024.