ARUNACHALAM SANKAR,PERAMBALUR vs. ITO WARD 1, PERAMBALUR

Year:2017-18 Shri Arunachalam Sankar, The Income Tax Officer, 3/10, Indhira Street, Vs. Ward 1, Perambalur – 621 212. Perambalur. PAN: CMJPS 9306L (अपीलाथ�/Appellant) (��यथ�/Respondent) अपीलाथ� क� ओर से/Appellant by : Shri Girish Kumar, Advocate ��यथ�क� ओर से/Respondent by : Ms. R. Anita, Addl. CIT सुनवाई क� तार�ख/Date of Hearing : 22.08.2024 घोषणा क� तार�ख/Date of Pronouncement : 22.08.2024 आदेश /O R D E R

PER MAHAVIR SINGH, VICE PRESIDENT:

2. The only issue in this appeal of assessee is as regards to the order of CIT(A)-NFAC in confirming the action of AO in re-computing the Gross Profit rate at 12% on the gross sales and making addition of Rs.6,82,333/-. For this, assessee has raised various grounds which are argumentative, exhaustive and hence, need not be reproduced.

The AO during the course of scrutiny assessment made addition of unexplained credit of Rs.19,99,950/- being cash deposits made during demonetization period in Corporation Bank. The CIT(A) deleted the addition but stated that the cash deposit is arising out of business receipts and assessee was allowed to accept SBNs during the period of demonetization and the assessee has made total sale Bharathi Airtel SIM cars amounting to Rs.98,80,605/- and according to him, the trading result declared by assessee are not verifiable in the absence of books of accounts. Therefore, he deleted the addition of cash deposits but estimated profit rate at 12% as against estimated by assessee at 5% by observing in para 6.9 & 6.10 as under:- 6.9. In view of the facts and circumstances, submissions of the appellant, findings of the AO, material evidence brought on record and the provisions of Section 69 r.w.s 115BBE of the Income-tax Act, it is my considered opinion that the appellant has been able to prove the source of cash deposits i.e. out of business receipts and it also emerged that the appellant was allowed to accept SBNs during the period of demonitization as per notification. Further, the appellant has shown payments to the Bharthi Airtel Limited for purchase of recharge coupons. The AO has not brought any evidence on record to the fact that the appellant has any other source of income to controvert the contentions of the appellant. As cited above, the appellant has been able to prove the genuineness of the transactions i.e. they constitute business receipts. However, the appellant himself admitted that during this financial year pertaining to the assessment year, the appellant has made total sale value of Rs. 98,80,605/- and offered net profit of Rs. 2,91,526/-. On the facts and circumstances, I am, therefore, of the considered opinion that the provisions of Section 69 r.w.s 115BBE of the Income-tax Act invoked by the AO to bring the impugned cash deposits by the appellant to tax are not justified.

6.10. The appellant has not maintained any books of accounts. In the absence of books of account, the trading results shown by the appellant being non-verifiable cannot be relied upon, it will be, therefore, reasonable and fair to apply GP @ 12% to the gross sales of the appellant amounting to Rs. 11,85,673/- and after allowance of GP of Rs.5,03,340/- already shown by the appellant, the addition works out to be Rs.6,82,333/-.

Aggrieved, assessee is in appeal before the Tribunal.

4. We noted that the assessee is regularly disclosing profit rate at 1% to 2% and in this year, due to large increase in sale, profit rate was declared at 5%. Even in scrutiny assessment in assessment year 2018-19 (copy of order filed before us, which is placed on record), the profit rate is accepted at 1%. In term of the above, we are of the view that a reasonable and fair profit rate should be applied and according to us, instead of 12%, it should be applied at the rate of 6%. We accordingly estimate the profit rate at 6% and direct the AO to re-compute the income accordingly. The appeal of the assessee is partly-allowed.

Order pronounced in the open court at the time of hearing on 22nd August, 2024 at Chennai.