2024 (6) TMI 6 - AT - Income Tax

Admission of additional evidence u/r 46A of IT Rules - CIT(A) deleted addition on merits of the case admitting additional evidences - HELD THAT - We find merit in these contentions of the counsel since the evidences furnished by the assessee supports that there has been sales of bullion during the year under consideration and the AO ought to have called for further details if evidences not furnished by the assessee or conducted enquiries from bank or third parties to bring corroborative evidence on record to controvert and disprove the claim of the assessee that the disputed cash deposits were otherwise than sale proceeds of bullion based on charging commission @ 1% during the relevant year under consideration. Therefore the revenue s objection that the non- admission of additional evidence for the reason that the assessee did not furnish the documentary evidence inspite of giving several opportunities is not correct. We hold that the CIT (A) was correct in admitting the additional evidence while deleting the addition on merits of the case. Accordingly the department s objection in ground no.2 regarding admission of additional evidence under clause (b) to sub rule1 to Rule 46A of I.T. Rules is rejected. Unexplained cash deposit u/s 69A - NP rate determination - appellant explained that the deposits were sale proceeds from his bullion trading business under Riddhi Siddhi Jewels where he earned a 1% commission - HELD THAT - As established that during the year under consideration the appellant frequently deposited sale proceeds in the bank account and there were subsequent withdrawals for making payments against purchases also. From the information and explanation furnished by the counsel for the assessee we are of the view that the Ld. CIT(A) decision has been most judicious in applying NP rate of 1% on entire sale proceeds/cash deposits to estimate the true and correct profit for the year under consideration in the light of the settled legal position that entire proceeds cannot be regarded as profit or income of the assessee and net profit rate has is to be applied as per standard principle of accountancy as well. Application of Net Profit (NP) Rate on Total Deposits - CIT(A) has held that to cover up possible leakages of Revenue he has applied net profit @ 1.2% of the total deposits as against 1% claimed by the appellant as commission income in the belated return filed on parity to the other assessee engaged in the same line of business. In the present case although the AO passed exparte assessment order but the ld. CIT(A) has passed a well-reasoned judicious order considering additional evidence to effect to accepting the cash deposits in bank account as sale receipts. Considering the facts in totality the estimation of profit by applying NP rate of 1.2 % by the Ld. CIT(A) was quite fair and reasonable. We are therefore of the considered opinion that the Ld. CIT(A) was justified to apply NP rate @1.2% for estimation of commission earned on the total sales of bullion and as such same is sustained. Accordingly this ground of appeal of the assessee is rejected.

Summary

Issues Involved:
1. Validity of notice u/s 148 and assessment u/s 144/147.
2. Reduction of addition on account of unexplained cash deposits u/s 69A.
3. Admission of additional evidence under Rule 46A of the I.T. Rules.
4. Estimation of net profit rate (NP rate) on total deposits.

Summary:

1. Validity of Notice u/s 148 and Assessment u/s 144/147:
The assessee challenged the validity of the notice issued u/s 148 and the subsequent assessment u/s 144/147, claiming it was void ab initio. The CIT(A) confirmed the validity of the reopening of the assessment u/s 147.

2. Reduction of Addition on Account of Unexplained Cash Deposits u/s 69A:
The AO treated the entire deposits of Rs. 4,43,07,000/- as unexplained money u/s 69A. The CIT(A) reduced this addition to Rs. 5,31,684/-, applying a net profit rate of 1.2% on the total deposits, considering them as sales proceeds from the assessee's bullion trading business. The Tribunal upheld this reduction, agreeing with the CIT(A)'s application of the NP rate and the partial relief granted to the assessee.

3. Admission of Additional Evidence under Rule 46A of the I.T. Rules:
The CIT(A) admitted additional evidence under Rule 46A, which the AO had objected to. The CIT(A) found that the assessee was prevented by sufficient cause from producing the evidence during the assessment proceedings. The Tribunal supported this decision, noting that the additional evidence was crucial for a fair adjudication of the case.

4. Estimation of Net Profit Rate (NP Rate) on Total Deposits:
The CIT(A) applied an NP rate of 1.2% on the total deposits, treating them as sales, to estimate the assessee's profit. The assessee contended that the commission rate should be 1%. The Tribunal upheld the CIT(A)'s decision, considering it fair and reasonable to apply an NP rate of 1.2% to cover potential revenue leakages.

Conclusion:
The Tribunal dismissed the cross appeals of the revenue and the assessee, and the cross objection of the assessee, upholding the CIT(A)'s decisions on all issues. The order was pronounced on 11.01.2024 at ITAT Amritsar Bench, Amritsar.