RAGHAVENDRA BACHA, HYDERABAD vs. INCOME TAX OFFICER, WARD - 4(1),, HYDERABAD.

This appeal filed by the assessee is directed against the order dated 26/06/2024 of the learned CIT (A)-NFAC Delhi, relating to A.Y.2016-17.

The assessee raised the following grounds:

The brief facts of the case are that the assessee is an individual and has not filed his return of income for the A.Y 2016- 17. On the basis of specific information flagged by Risk Management Strategy formulated by CBDT, income chargeable to tax has escaped assessment in the case of the assessee.

Being aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT (A). Before the learned CIT (A) the assessee reiterated his arguments made before the Assessing Officer and submitted that merely for the reason not filing VAT Registration and other details, the argument of the assessee that the source of cash deposit into bank account is out of business receipts cannot be disregarded, more particularly, when the assessee claimed that he does not require to obtain GST Registration because of his low turnover. The learned CIT (A) after considering the relevant submission and also taken note of the reasons given by the Assessing Officer to make addition towards cash deposits, rejected explanation furnished by the assessee and sustained the addition made towards cash deposits u/s 69A of the I.T. Act, 1961.

Aggrieved by the order of the learned CIT (A), the assessee is in appeal before the Tribunal.

The learned Counsel for the assessee submitted that the learned CIT (A) is erred in sustaining the addition made towards cash deposits as unexplained money without appreciating the fact that the assessee is into the business of trading in building material which is in unorganized sector and Page 4 of 7 therefore, the question of furnishing GST Registration does not arise, more particularly, when the assessee is not required to obtain said registration if his gross receipts/turnover does not exceed the threshold limit. Therefore, he submitted that the addition made by the Assessing Officer should be deleted.

The learned DR, on the other hand, supporting the orders of the learned CIT (A) submitted that the appellant could not substantiate his argument that source for cash deposits is out of business receipts. The Assessing Officer and the learned CIT (A) after considering the relevant facts has rightly made the addition towards cash deposits u/s 69A of the I.T. Act, 1961 and their orders should be upheld.

We have heard both the parties, perused the material available on record and gone through the orders of the authorities below. There is no dispute with regard to the fact that the appellant has not filed regular return of income u/s 139 of the I.T. Act, 1961. It is also an admitted fact that the appellant has filed return of income in response to notice issued u/s 148 of the I.T. Act, 1961 and declared gross turnover of Rs.18,42,000/- and estimated 14% net profit and declared total income of Rs.2,57,410/-. The assessee claimed that the source for cash deposits is out of business receipts and total cash deposits has been offered to tax under presumptive tax in terms of section 44AD of the I.T. Act, 1961. The Assessing Officer dis not accept

I have gone through the reasons given by the Assessing Officer to make addition towards u/s 69A of the I.T. Act, 1961 in light of the argument of the learned Counsel for the assessee and I find that, the Assessing Officer rejected the explanation of the assessee only on the ground that the appellant failed to file relevant GST/VAT Registration and returns filed under the said Act. In my considered view, the Assessing Officer is completely erred in coming to the above conclusion for the simple reason that the registration u/s GST/VAT is mandatory, if gross receipts/turnover from the business exceeds certain threshold. In the present case, the appellant claims that he does not require to obtain registration under GST because his turnover is below the threshold limit under GST Act. In my considered view, merely for not submitting GST registration and return, the argument of the assessee cannot be rejected, because as I have noticed in earlier part of this order, the registration is mandatory only in case gross receipts exceeds the threshold. Since the gross receipts of the appellant is below the threshold limit, in my considered view, the argument of the assessee that source for cash deposit into bank account is out of his business receipts needs to be accepted. At the same time, the assessee is also not able to file relevant evidences including bills/vouchers for purchase and sales to Page 6 of 7 prove his argument and also to justify 14% net profit declared under presumptive taxation. Therefore, considering the facts and circumstances of the case and also the nature of the business of the assessee, I am of the considered view that a reasonable amount of profit should be estimated to meet the ends of justice. Thus, I direct the Assessing Officer to estimate 25% profit on total cash deposits of Rs.18,42,000/- into bank accounts. I order accordingly.

In the result, appeal filed by the assessee is partly allowed.