2024 (6) TMI 418 - AT - Income Tax

Estimation of Gross Profit - treating the entire deposits in the bank account as turnover of the appellant - CIT(A) justification in directing the AO to estimate the gross profit @ 6% of the turnover - HELD THAT -When the assessee claims that all the credits are not the turnover of the assessee-firm, the onus is on the assessee to prove its claim with cogent documentary evidence, which the assessee failed to do so even before us. Further, in the absence of any documentary evidence to prove the variation of Rs. 63,27,044/-, as contended by the assessee, and also in the absence of any books of account and bills vouchers etc., for verification to substantiate the cash deposits, taking into account the earlier years disclosure of gross profit by the assessee, the Ld. AO estimated the income of the assessee @8% and on appeal the Ld. CIT(A)-NFAC has granted considerable relief to the assessee by directing the Ld. AO to estimate the GP @ 6%. No hesitation to come to a conclusion that there is no infirmity in the order of the Ld. CIT(A)-NFAC and it does not call for any interference. Accordingly, the grounds raised by the assessee are dismissed.

Summary

Issues involved:
The issues involved in this case are related to the assessment of income u/s 144 of the Income Tax Act, 1961 for the AY 2017-18, specifically concerning substantial cash deposits during the demonetization period, estimation of gross profit, and penalty proceedings u/s 270A of the Act.

Assessment of Income u/s 144:
The assessee, a Firm engaged in distribution, had substantial cash deposits during the demonetization period. The Ld. AO observed non-compliance with notices and lack of verifiable evidence for the cash deposits. The assessment was completed u/s 144, estimating income @ 8% of total cash credits. The Ld. CIT(A)-NFAC partly allowed the appeal, estimating gross profit @ 6% due to lack of documentary evidence justifying actual profits. The Tribunal upheld the Ld. CIT(A)-NFAC's decision, emphasizing the assessee's failure to substantiate claims with evidence.

Estimation of Gross Profit:
The Ld. AR argued that all bank credits were not turnover, citing a variance of Rs. 63,27,044 between total sales and credits. The Ld. CIT(A)-NFAC directed the Ld. AO to estimate gross profit @ 6% instead of 8%, considering the assessee's lower GP rates in previous years. The Tribunal found the Ld. CIT(A)-NFAC's decision reasonable, as the assessee failed to provide documentary evidence supporting claims or justifying lower GP rates.

Penalty Proceedings u/s 270A:
The Ld. AO initiated penalty proceedings u/s 270A due to misreporting of income. The Tribunal's decision to dismiss the appeal indicates that the Ld. CIT(A)-NFAC's order did not warrant interference, as the assessee did not meet the burden of proof and failed to substantiate claims with verifiable evidence. The Tribunal upheld the estimation of income and gross profit, emphasizing the importance of providing documentary evidence to support claims during assessments.