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Facts
The assessee, a scrap dealer, filed his return declaring income under Section 44AD. The Assessing Officer made an addition of Rs. 39,62,881 under Section 68, treating cash sales made in October 2016 as bogus, as no sales were recorded before or significantly after this period. The CIT(A) sustained this addition.
Held
The ITAT condoned a 196-day delay in filing the appeal due to the demise of the assessee's counsel. It then held that since the assessee regularly declared income under Section 44AD and was not required to maintain books of accounts, the sales could not be rejected merely on suspicion, especially given the irregular nature of the scrap business. The addition was deleted.
Key Issues
The key legal issues were the condonation of delay in filing the appeal and whether cash sales declared by an assessee under Section 44AD could be treated as bogus and added back under Section 68, despite being recorded in books and supported by VAT returns.
Sections Cited
Section 68, Section 143(2), Section 142(1), Section 115BBE, Section 44AD, Section 234A, Section 234B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AGRA (SMC
Before: SHRI S. RIFAUR RAHMAN
IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA (SMC) BENCH, AGRA BEFORE : SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER Assessment Year: 2017-18 Anand Kumar Jain Vs. Income-tax Officer, 30/41, Chhipitola Ward-1 (1)(1), Agra Agra PAN :AARPJ3189L (Appellant) (Respondent) Assessee by Shri Gaurav Goyal , CA Department by Shri Anil Kumar, Sr. DR Date of hearing 16.02.2026 Date of pronouncement 20.02.2026 ORDER
The assessee has filed this appeal against the order of the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 23.10.2024 for the Assessment Year 2017-18.
At the time of hearing, it is brought to our notice that there is a delay of 196 days in filing the appeal before ITAT. At the time of hearing, ld. AR of the assessee brought to my notice. The application for condonation of delay and affidavit filed by the assessee. It is submitted that the delay is due to unfortunate demise of Sh. P. N. Agarwal, the counsel of the assessee. The assessee was not informed/ aware of the order of ld. CIT(Appeals) dated 23.10.2024. The assessee came to know while consulting with the new counsel upon came to know of the First Appellate Order. He proceeded to file the appeal immediately and delay in filing the appeal is not intentional. After considering the submissions of both the parties. I observe that there is sufficient cause for non filing of appeal in ITAT. After considering the peculiar facts in this case, I am of the view that the assessee was ill informed of the status of the appeals. There is reasonable cause for such huge delay. To meet the ends of justice, I proceed to admit the appeal for adjudication and accordingly, the delay is condoned.
Brief facts of the case are, the assessee filed his return of income on 15.01.2018 declaring total income of Rs. 3,46,660/-. The case of the assessee was selected for scrutiny. Accordingly, notice u/s 143(2) and 142(1) were issued and served on the assessee. The assessee as claimed, remained engaged as a scrap dealer in trading of copper/brass scrap and electronic/mechanical scrap material etc. under a proprietary concern, namely Jain Enterprises. The assessee also filed copy of trading and profit and loss account for the year under consideration wherein the assessee has declared sales of Rs. 39,62,881/- with a net income of Rs. 3,52,021/-. During the assessment proceedings, it was observed that the assessee has made cash deposit.
After considering the submissions of the assessee for assessment year under consideration and previous assessment year, the Assessing Officer observed from the cash book for the period 01.04.2016-31.03.2017 and the invoices no. 1 to 100 during the period 01.10.2016 to 28.10.2016, it was noticed that there was no sales up to 30.09.2016 either in cash or otherwise and even no sales after 28.10.2016. Therefore, the Assessing Officer came to the conclusion that the assessee has recorded bogus sales in order to deposit the undisclosed cash after declaration of demonetization on 08.11.2016. He discussed elaborately at page 5 & 6 of the assessment order. Accordingly, he proceeded to make the addition of Rs. 39,62,881/- as unexplained cash credit u/s 68 of the Act with the observations that sales declared by the assessee are bogus in nature.
Aggrieved with the above order, the assessee preferred an appeal before ld. NFAC and filed a detailed submission. After considering the detailed submissions, the ld. CIT(Appeals) sustained the addition made the Assessing Officer.
Aggrieved, the assessee is in appeal before ITAT, raising following grounds:
1. That the Learned CIT(A) has erred in law and on facts in upholding the addition of Rs. 39,62,881/- made by the Assessing Officer u/s 68 of the Income Tax Act, 1961, by treating the entire cash sales as unexplained cash credits without properly appreciating the nature of business and documents submitted.
2. That the Learned CIT(A) has grossly erred in upholding that the cash sales effected in October 2016 were accommodation entries without bringing on record any cogent or corroborative evidence and solely relying on suspicion and human probability.
3. That the Learned CIT(A) failed to appreciate that the cash sales were duly recorded in the books of accounts, supported by VAT returns and sale invoices, and were part of regular business activity since many years.
4. That the Learned CIT(A) erred in sustaining the addition u/s 68 read with section 115BBE, even when no credit was found in the books within the meaning of section 68, and the source of cash was duly explained as out of regular business receipts.
5. That the Learned CIT(A) failed to appreciate that provisions of section 44AD were applicable and the appellant had declared income higher than 8%, hence no further scrutiny of books or rejection thereof was warranted.
6. That the CIT(A) erred in ignoring the fundamental legal principle that once income is computed on a presumptive basis u/s 44AD, no further addition on account of sales or cash deposits is permissible unless duly rebutted.
7. That the order of A.O is bad in law and liable to be quashed as it is based on conjectures, surmises and suspicion without any concrete evidence or findings of actual unaccounted income.
8. That the interest charged u/s 234A and 234B is consequential and liable to be deleted in view of the fact that the underlying addition itself is unwarranted and not legally sustainable. 9. That the appellant craves leave to add or alter the grounds of appeal.
At the time of hearing, ld. AR of the assessee submitted that the assessee is in the business of scrap trading, he has declared the sales in the financial statement relevant sales and also declared the income u/s 4 | P a g e 44AD of the Act and paid the relevant presumptive taxes. He submitted that the same sales are being questioned by the Assessing Officer rejecting the submissions of the assessee. In this regard, he brought to our notice page 28 & 29 of the paper book which is the return of income filed by the assessee, declared income u/s 44AD of the Act. He also brought to our notice gross receipts/turnover of Rs. 39,62,881/- u/s 44AD of the Act . Further, he brought to our notice page 46 of the paper book which is the sales chart for Financial Year 2014-15 to 2016-17 wherein it was declared the sales for the period and ld. AR submitted that the assessee is in business of scrap, the sales are declared not specific to any of the month wherever there is possibility purchase of scrap. He purchases the same and sells the same. He brought to our notice sales for Financial Year 2014- 15. The assessee has made both cash purchase and sales and Similarly in Financial Year 2015-16. In the year under consideration, he submitted that the assessee has purchased and sold during October 2016. He further submitted that there is no fix pattern in scrap sales business. He further brought to our notice page 50 & 51 of the paper book wherein in the previous assessment year income declared by the assessee was accepted u/s 143(3) of the Act. In this regard, he brought to our notice financial statement of the assessee for year ending 31.03.2015.
On the other hand, ld. DR brought to our notice page 5 of the assessment order where Assessing Officer has discussed peculiar nature of doing business in the month of October, 2016 and not carrying on the business subsequently, he submitted that assessee has recorded cash sales in order to bring his undisclosed income and relied on the finding of lower authorities.
Considered the rival submissions and the material placed on record. I observe that the assessee is in the business of scrap trading and in the year under consideration, the assessee has traded to the extent of Rs. 39,62,881/-, no doubt the assessee had traded only during month of October, 2016 and has not carried out any other business. Further, I observe that the assessee is regularly doing business of scrap sales and declared the income u/s 44AD of the Act. The assessee has brought to our notice last 3 years sales chart to submit that the assessee is regularly doing business and filing the return of income declaring income u/s 44AD of the Act. Considering the peculiar nature of the business carried on by the assessee, there is no particular pattern of sales by observing from the sales declared in the previous A.Ys. Just because the assessee has declared sales during the month of October, 2016, the AO proceeded to consider the same as bogus sales. Since, the assessee has declared income u/s 44AD
6 | P a g e of the Act. There is no requirement for the assessee to maintain any books of accounts. Since, the assessee is regularly declaring the income u/s 44AD of the Act. I observe that the assessee has traded during this year only on Oct, 2016, the same cannot be rejected on the basis of suspicion. Therefore, I am inclined to delete the additions made by the Assessing Officer. Accordingly, I am inclined to allow the grounds raised by the assessee.
In the result, appeal filed by the assessee is allowed.