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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI ABY T VARKEY, HON’BLE & SHRI S. R. RAGHUNATHA, HON’BLE
आयकर अपीलीय अिधकरण, ‘बी’ �यायपीठ, चे�ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI �ी एबी टी वक�, �याियक सद�य एवं �ी एस. आर. रघुनाथा, लेखा सद�य के सम� BEFORE SHRI ABY T VARKEY, HON’BLE JUDICIAL MEMBER AND SHRI S. R. RAGHUNATHA, HON’BLE ACCOUNTANT MEMBER आयकर अपील सं./ITA No.: 951/Chny/2023 िनधा�रण वष� / Assessment Year: 2017-18 Income Tax Officer, Mohana Ganesh, v. Non Corporate Ward 3(3), 11/8 A, C Block, Shibiraj Coimbatore. Niraivagam, Rajendra Nagar Extension, Narasimnaicken Palayam, Coimbatore – 641 031. [PAN: AKSPM-2291-B] (अपीलाथ�/Appellant) (��यथ�/Respondent) : Shri. S. Sridhar, Advocate (Erode) अपीलाथ� क� ओर से/Appellant by ��यथ� क� ओर से/Respondent by : Shri. D. Hema Bhupal, JCIT सुनवाई क� तारीख/Date of Hearing : 07.05.2024 घोषणा क� तारीख/Date of Pronouncement : 28.06.2024 आदेश /O R D E R PER S. R. RAGHUNATHA, ACCOUNTANT MEMBER:
This appeal by the assessee is filed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, for the assessment year 2017-18, vide order dated 22.08.2023.
The Assessee is aggrieved by the action of the Assessing Officer making addition of Rs.71,76,662/- (8% of Rs.8,97,08,273/-)
:-2-: ITA. No: 951/Chny/2023 and Rs.25,21,500/- u/s. 69A of the Income Tax Act, 1961 (hereinafter referred to as “the Act”).
The brief facts are that the Assessing Officer noted that the assessee has deposited an amount of Rs.25,21,500/- in his bank account during demonetization period which prompted the Assessing Officer to issue notice u/s. 142(1) of the Act to the assessee and finding no reply from the assessee, the Assessing Officer made an addition of 8% of the total deposits to the bank to the tune of Rs.8,97,08,273/- making an addition of Rs.71,76,662/- as well as he added Rs.25,21,500/- deposited during demonetization period u/s. 69A of the Act.
Aggrieved, the assessee preferred an appeal before the ld.CIT(A) and pleaded that the assessee’s net profit for earlier years were only 1.55% for assessment year 2016-17; 1.38% for assessment year 2015-16 and 1.92% for assessment year 2014-15. The assessee pointed out that she was regularly filing her return of income and furnishing audit report as per section 44AB of the Act, but in the relevant year she could neither file return of income nor filed any documents before the Assessing Officer because she was bed-ridden and was under medical treatment for complications
:-3-: ITA. No: 951/Chny/2023 arising due to advanced stage of pregnancy. Therefore, in the year under consideration, assessee couldn’t neither maintain any books of accounts nor look after the business properly. In such a back- drop, it was pleaded before the ld.CIT(A) that even though the Assessing Officer estimated the income of the assessee @8%, it was high and unreasonable and pleaded that, it has to be reasonable as held by the Hon’ble Rajasthan High Court in the case of CIT vs Gotan Lime Khanij Udhyog reported in 256 ITR 243, wherein their lordship have held that past history of the case also needs to be considered while estimating the income of the assessee. The assessee also submitted the earlier three years financials/audited books would show that the average net profit was only 1.55% as against the 8% as computed by the Assessing Officer. Therefore, assessee pleaded that the estimation of profit be restricted at 1.55%. The ld.CIT(A) after examining the earlier years books/audited financials was of the opinion that the Assessing Officer ought not to have estimated net profit at 8% and restricted the net profit estimated by the Assessing Officer to Rs.14,53,274/- @1.62% on the turnover of Rs.8,97,08,273/-. Thus, relief of Rs.57,23,388/- was granted to the assessee.
:-4-: ITA. No: 951/Chny/2023 5. However, the ld.CIT(A) did not agree with the contentions of the assessee that SBN's deposited during demonetization separately added by Assessing Officer of Rs.25,21,500/- u/s. 69A of the Act was also the very same trading receipts of the assessee and therefore only the profit embedded in the sole transaction can be added, was rejected by ld.CIT(A) and he confirmed the action of Assessing Officer. Aggrieved by the aforesaid action of the ld.CIT(A), the assessee is before us.
We have heard both the parties, perused materials available on record and gone through orders of the authorities below. We note that the assessee is a proprietor of a concern, who was regularly filing return of income along with audit report. However, in the relevant assessment year, due to advanced stage of pregnancy and due to certain complications, she was not able to look after the business properly which led to the non-maintenance of books as well as non-filing of return. Since, in the year under consideration, there was certain deposits of SBNs in the bank account of the assessee, the Assessing Officer issued notice to the assessee for assessment of her income. Since, the assessee did not receive the notices, she could not participate in the assessment proceedings. Regarding the cash deposits, during demonetization
:-5-: ITA. No: 951/Chny/2023 period, the Assessing Officer noted in the assessment order that though the assessee had turnover of Rs.9,22,29,773/- out of which Rs.25,21,500/- was deposited which was only 2.73% of the turnover. However, the Assessing Officer added the entire cash deposits of Rs.25,21,500/- u/s.69A of the Act as well as estimated the business income of the assessee at 8% of the balance turnover i.e. Rs.8,97,08,273/- i.e., Rs.71,76,662/-. On appeal, the ld.CIT(A) partly allowed the appeal of the assessee and restricted the business income @1.62% of Rs.8,97,08,273/- at Rs.14,53,274/- in place of Rs.71,76,662/-. However, confirmed the addition u/s. 69A of the Act.
The main plea of the ld.AR of the assessee that the assessee was regularly maintaining books which was duly audited and filing return of income and due to pregnancy complications she could not properly look after the business which led non- maintenance of books as well as non-filing. The plea of the ld.AR is that when the ld.CIT(A) after examining the financials/audit accounts of the assessee for the earlier three years (AY 2014-15 to AY 2016-17) estimated the net profit @1.62% (average net profit), he should have applied the same as profit from the sale transactions which were deposited as SBN's during demonetization
:-6-: ITA. No: 951/Chny/2023 period. We note that from the earlier years statistics and since it is not the case of Assessing Officer that assessee had any other source of income, we presume that there was no other source of income for the assessee other than the trade receipts, considering the peculiar facts and circumstances of the case and there is no other evidence to suggest that the nature of the deposits can be termed as unexplained money u/s. 69A of the Act, we presume that the receipt is from the regular business operations. We also note that this Tribunal in such facts and circumstances has been taken similar view in the following cases: - Mrs. Umamaheshwari vs ITO in ITA No: 527/Chny/2022 dated 14.10.2022 - M/s. Mickey Fireworks Industries vs ACIT in ITA No: 264/Chny/2023 dated 26.07.2023.
Respectfully following the jurisdictional Tribunal decisions and the peculiar facts and circumstances of the case, we direct the Assessing Officer to delete Rs.25,21,500/- and compute the net profit @1.62% for the entire turnover of Rs.9,22,29,773/- which comes to Rs.14,94,122/- is confirmed.
:-7-: ITA. No: 951/Chny/2023 8. In the result, appeal filed by the assessee is partially allowed. Order pronounced in the open court on 28th June, 2024 at Chennai.