SUBBIAH CHANDRAMOHAN,PUDUKOTTAI vs. ITO WARD 1, PUDUKOTTAI
What did the Tribunal hold?
The Tribunal held that the Assessing Officer cannot make a separate addition for SBNs when income has already been estimated at 8% of turnover. It directed the Assessing Officer to adopt 4% of the total turnover plus the SBN amount for determining net profit.
What were the facts?
The Assessing Officer estimated the assessee's net profit at 8% of turnover and also made a separate addition for cash deposits, including Specified Bank Notes (SBNs). The assessee argued that cash deposits were from business receipts and that the addition of SBNs was a double addition.
What were the issues?
Whether the Assessing Officer was justified in making separate additions for cash deposits (including SBNs) after estimating net profit at a percentage of turnover.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Before: Shri S.S. Viswanethra Ravi&
O R D E R
PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER:
This appeal filed by the assessee is directed against the order dated 27.12.2023 passed by the ld. CIT(A) [NFAC], Delhi for the assessment year 2017-18.
The assessee raised 3 grounds of appeal amongst which the only issue emanates for our consideration is whether the ld. CIT(A) was justified in confirming the addition made by the Assessing Officer on estimating net profit at 8% of the turnover.
We note that the Assessing Officer found cash deposit in the bank account of the assessee which are reproduced in page 1 and 2 of the assessment order. The assessee submitted that the said cash deposits were made out of business receipts. According to the Assessing Officer, the total credit in the bank account of the assessee is at ₹.1,12,10,293/- and the cash deposits during the demonetization period is at ₹.28,59,200/-. Further, observed total amount of cash deposited in Specified Bank Notes [SBNs] is to an extent of ₹.14,90,000/-. It was submitted that the assessee is in the retail business of milk supply and the said deposits were out of daily business receipts. The Assessing Officer estimated net income at ₹.13,25,183/- being 8% of total turnover of ₹.1,65,64,795/-. Apart from that, the Assessing Officer also added separately the SBNs to an extent of ₹.17,93,800/- totalling to ₹.31,18,983/-.
3. The ld. AR Shri R. Subramanian, CA contended that having adopted the estimation of income at 8% of the total turnover, the Assessing Officer cannot make another addition on account of cash deposit containing SBNs. We find force in the argument of the ld. AR that all cash deposits are related to business of the assessee and the Assessing Officer found cash deposits of all denomination apart from SBNs. When the Assessing Officer adopted 8% of the total turnover as income of the assessee, he cannot make another addition on account of SBNs. We note that the ld. CIT(A) confirmed the same, which is in our opinion, is not justified. It was submitted by the ld. AR that the assessee’s net profit ratio is around 2% to 3% and accordingly prayed to restrict the same. Under the above facts and circumstances, we direct the Assessing Officer to adopt 4% of total turnover i.e., ₹.1,65,64,795/- plus ₹.17,93,800/- and determine the net profit on the same. Thus, the ground raised by the assessee is partly allowed to extent stated hereinabove.
In the result, the appeal filed by the assessee is partly allowed. Order pronounced on 05th June, 2024 at Chennai.
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