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Income Tax Appellate Tribunal, HYDERABAD BENCHES “B”, HYDERABAD
Before: SHRI R.K. PANDA & SHRI LALIET KUMAR
/Assessee by: None निर्धारितीती द्वारा /Revenue by: Ms. Sheetal Sarin, A.R. राजस्व द्वारा ई की तारीखरीख/Date of hearing: 04.01.2024 सुनवाई की तारीखरीख/Pronouncement on: 22.02.2024 घोषणा O R D E R PER LALIET KUMAR, J.M.
This appeal is filed by the assessee, feeling aggrieved by the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi invoking proceedings under section 143(3) of the Income Tax Act, 1961 for the assessment year 2017-18.
The grounds raised by the assessee read as under :
“1. The learned CIT(A) has erred in law and on facts and circumstances of the case, in, dismissing the appeal of, the Appellant. 2. The learned CIT(A) has erred in not adjudicating the ground raised by the Appellant on the issue of rejection of the book, of accounts of the Appellant without giving proper opportunity of being heard:
3. The learned, CIT(A) has grossly erred in law and on facts in confirming the addition of Rs.47,93,500/- made by the Assessing Officer under section 69A on the ground that cash deposits were made during the demonetization period without appreciating the nature of business carried on by the Appellant.
4. The learned CIT(A) has grossly erred in law and on facts confirming the addition of Rs.53,16,012, being the estimation of income at 8% on the turnover of Rs.6,64,50,150/- on the ground that the Appellant had offered no plausible reason for the fall in gross profit by ignoring the detailed reason submitted by the Appellant in the statement of facts as well as in the submissions made before learned CIT(A).
5. The learned CIT(A) has erred in law and on facts in confirming the estimation of income at 8% on turnover of Rs. 6,64,50,150 without considering the fact that the Appellant had disclosed returned income of Rs.9,77,840 on the total turnover of of Rs.7,12,43,650.”
The brief facts of the case are that assessee is an individual who filed its return of income on 24.10.2017 for A.Y. 2017-18 admitting total income of Rs.9,77,840/-. The return was processed u/s 143(1) of the Act. Thereafter, the case was selected for scrutiny under CASS and notice u/s 143(2) of the Act was issued on 11.08.2018 and subsequently, notices u/s 142(1) of the Act were issued electronically to the assessee calling for information from time to time. As there was no response, assessee was also issued a show cause notice on 05.12.2019. As per the information received through AIMS, the Assessing Officer found that assessee had made cash deposits aggregating to Rs.47,93,500/- into bank account during the demonetization
3 period. As there was no response from the assessee even to the show cause notice, information was gathered from the banks as per the provisions of Section 133(6) of the Act. Despite giving several opportunities assessee failed to furnish any explanation with regard to cash deposited during the demonetization period. In the absence of any valid information along with any corroborative evidence with respect to cash deposits, source of cash deposits etc., Assessing Officer considered the said amount as income of the assessee and added to the income of the assessee u/s 69A of the Act.
3.1. Thereafter, Assessing Officer found that the total credits into the bank accounts were amounting to Rs.1,09,59,126/-. Taking into consideration the cash deposited of Rs.47,93,500/-, which was added back as income of the assessee, the balance credits of Rs.61,65,626/- was examined by the Assessing Officer. As there was no information with regard to cash deposits, as no other alternative, Assessing Officer estimated the income at 8@ of the total gross receipts’ credits appearing in the audit report u/s 44AB of the Act, which was worked out to Rs.53,16,012/-. Accordingly, the Assessing Officer completed the assessment u/s 143(3) of the Act and passed assessment order on 18.12.2019 assessing the total income at Rs.1,10,87,352/-.
Feeling aggrieved with the order of Assessing Officer assessee filed an appeal, which was later migrated to the ld.CIT(A), NFAC, Delhi, who dismissed the appeal of assessee by observing as under :
“5. Ground of Appeal No.3: This ground of appeal is directed against addition of Rs.47,93,500/- made by the AO on account of unexplained income u/s.69A of the Act. Ground of Appeal No.4: This ground of appeal is directed against addition of Rs.53,16,012/- being estimated profit of 8% of the turnover. 5.1 Facts relating to Grounds of Appeal No.3 & 4: During the course of assessment proceedings, the AO found that the appellant had made cash deposits of Rs.47,93,500/- in bank accounts during the demonetization period. The AO vide show cause notice dated 02/12/2019 asked the appellant to show cause why the said sum should not be added to his total income. However, there was no response from the appellant. Since the appellant failed to furnish any explanation with regard to cash deposited during the demonetization period, the AO added the sum to the total income of the appellant u/s.69A of the Act. 5.1.1 Further, during the course of the assessment proceedings, the Assessing Officer observed from the Profit & Loss Account that the appellant had sales of Rs 7.12 crores and gross profit of Rs.0.18 crores whereas for the previous year the, appellant had sales of Rs. 1.92 crores and profit of Rs.0.15 crores. Therefore, the profit ratio worked out at 2.56% whereas the profit ratio for the previous year was 7.98% which shows fall of Gross profit compared to previous year. Therefore, the AO concluded 1W Pie books results shown by the appellant do not reflect true and fair picture of e pps4arts profitability and the net profit rate of 8%. Considering the business transaction and pattern verified from bank account statement and returns of income, ow AO estimated the income @8% of the gross receipts and added a Sum of Rs.53,16,012/-. 5.2 Submissions of the appellant on Grounds of Appeal No.3 & 4: During the course of the appellate proceedings, the appellant made the following submissions: "The appellant is an individual engaged in jewellery business, filed his original return of Income for the Assessment year 2017- 18 admitting a total income of Rs.9,77,840/-. The case was selected for scrutiny under CASS and the assessment was completed u/s 143(3) of the Income Tax Act, 1961 on 18.12.2019 by making addition of Rs.47,93,500/- as unexplained income by treating the cash deposits during the demonetization period and Rs. 53,16,012/- as income from business or profession by estimating the net profit @8% on entire receipts (excluding the cash deposits during the demonetization period) without considering appellants nature of business. Aggrieved by the above addition, the appellant came up with the present appeal. The appellant has filed his original return of income on 24.10.2017 duly audited by the Chartered Accountant. The Assessing Officer rejected books of account of the appellant on the ground that the gross profit ratio of the appellant has fallen down from 7.98 Percent in the Assessment Year 2016-17 to 2.56 Percent in the Assessment Year 2017-18. In this regard it is to be submitted that, the appellant was carrying business of only sale of ornaments in the Assessment year 2016-17 and declared turnover of Rs.1,92,47,630/-, however, the appellant started the business of purchase and sale of bullions during the year under consideration in which the profit margin is very low and sale proceeds from sale of bullions during the year is around 6.46 crores out of the total turnover of Rs.7.12 crores declared by the appellant. Hence, there is difference in profit ratio when compared to the previous year. The Assessing Officer rejected the books of account without considering the nature of business of the appellant which is bad in law.
It is to be further submitted that the appellant receives cash from the customers which is deposited in the bank account and the bullion is purchased immediately on the same or the next day through banking channel only. This fact is clearly evident from the bank statement available with the Assessing Officer during the assessment proceedings. The profit margin involved in purchase and sale of bullions is very nominal i.e., less than 1 percent. The Assessing Officer estimated income @ 8% of turnover declared by the appellant in his return of income without considering the nature of business of the appellant and also without giving any opportunity of being heard to the appellant on account of rejection of books of account is bad in law and against the principles of natural justice.
The assessing officer rejected the appellant's books of account, however estimated profit 8% considering the turnover declared by the appellant duly audited of Rs. 7,12,43,650/ -. It is to bring to your notice that, the turnover declared by the appellant is inclusive of all the cash deposits made during the year including the cash deposited during demonetisation period. However, the assessing officer excluded the cash deposited during demonetisation period of Rs. 47,93,500/- and treated them as unexplained income u/s 69A of the Income Tax Act, 1961. The cash deposited during the demonetisation period are in par with other business receipts representing sale proceeds from the sale of bullion and the payment of purchase of bullion is made immediately through banking channel as a regular practice followed by the appellant uniformly throughout the year. Moreover, the appellant has voluntarily disclosed the cash deposited during demonetisation period under the specified column in the original return of income for the year under consideration. Hence it is clear that the appellant is not trying to establish the sources for the cash deposit in the bank account during the assessment proceedings. Hence, it is kindly requested to treat the cash deposited during demonetisation period as business receipts of the appellant and delete the addition made of Rs.47,93,500/- as unexplained income U/s 69A of the Income Tax Act, 1961. On the basis of above explanation, it is kindly requested your honors to kindly delete the additions made of Rs.47,93,500/- as unexplained income U/s 69A of the Income Tax Act, 1961 and Rs.53,16,012/- as income from business or profession."
5.3. Decision on grounds of appeal No.3 and 4: The appellant is a jeweler. The first addition made by the Assessing Officer in cash deposit worth Rs.47,93,500/- made during the demonetization period. During the demonetization period, jewlers were not legally authorized to accept old 500 and 1000 notes (specified Bank notes) from the customers. Only petrol pumps and other essential service centers were allowed. 5.3.1. During the appellate proceedings, the appellant has stated that it has shown in the sales. This contention is not acceptable as the appellant has not shown the comparative deposits of the last year during this period. Since the appellant has deposited (specified bank notes) during the demonetization period, the addition of the Assessing Officer is confirmed on this ground. Accordingly, ground of appeal No.3 is dismissed. 5.3.2 Another addition made by the AO is worth Rs.53,16,012/- as 8% profit on the sale of Rs.7.12 crores. While in the previous year the gross profit was 7.98% i.e. the year of demonetization the sales of the appellant jumped from 1.92 crores to 7.12 crores. No plausible reason of the fall in gross profit was given during the assessment proceedings and during the appellate proceedings. Hence, the AO is justified in rejecting the books of accounts of the appellant and estimating the income @ 8% of the turnover. Hence, the addition of Rs.53,16,012/- is also confirmed and appeal is of the appellant is dismissed. Accordingly, ground of appeal no.4 is dismissed.
When the appeal was called on, none appeared on behalf of the assessee despite due service of notice of hearing. Previously also nobody appeared on behalf the assessee. Despite granting opportunities of being heard by the Tribunal, none appeared on behalf of the assessee and hence, we deem it proper to decide the appeal after hearing the ld. DR only.
Before us, ld. DR relied upon the orders of Assessing Officer and ld.CIT(A) and submitted that ld.CIT(A) has correctly confirmed the order of Assessing Officer.
We have heard the ld. DR and perused the material on record. We have gone through the record and the submissions of the assessee. In the present case, the Assessing Officer had made two additions. The first addition of Rs.47,93,500/- is on account of unexplained income u/s 69A of the Act and the second addition of Rs.53,16,012/- being estimated profit of 8% of the turnover. With respect to the first addition, we have gone through the order passed by the Assessing Officer as well as the ld.CIT(A). We do not find any reason to interfere with the order of the lower authorities as the assessee was not able to disclose the source of specifying bank notes of Rs.47,93,500/- deposited in the bank during the period of demonetization and for that purposes, we may fruitfully rely upon the decision in the case of Musaddilal Gems and Jewels Pvt. Ltd., Vs. ACIT in dt.28.11.2022.
7.1. With respect to the second addition, we observed that the profit ratio worked out by the Assessing Officer for the previous year was to 7.98 whereas the gross profit ratio worked out for the assessment year under consideration was 2.56. The Assessing Officer on the basis of the documents available on record has computed the gross profit ratio at 8% and made addition in the hands of the assessee. Here, the Assessing Officer has taken the gross profit ratio as adopted in the previous year and given justified reasons for the same and even the ld.CIT(A) also rightly confirmed the order of Assessing Officer as no plausible reason was given by the assessee during the appellate proceedings also. In view of the above reasons, we do not find any reason to interfere with the orders of lower authorities and accordingly, we upheld the orders of Assessing
8 Officer and ld.CIT(A). Accordingly, the appeal of the assessee is dismissed.
In the result, the appeal of the assessee is dismissed.