2024 (11) TMI 1030 - AT - Income Tax

Addition u/s 69A - unexplained cash deposited in the current bank account of the assessee s sole proprietorship concern - validity of invoking of Section 115BBE by AO - assessee is running a petrol pump allotted by BPCL - HELD THAT -Monthly details of purchase sales have also been placed before us and there is no major increase in sales during the demonetization period and they have normally been consistent throughout the year. Therefore, we are of the considered view that the alleged cash deposit is from sale of petroleum products at the petrol pump allotted by BPCL (a public sector undertaking) which is run by the assessee in the name of M/s. Pappu Fuel Station. Determination of Net profit earned during the year - Assessee has declared a net profit of Rs. 3,07,646/- and gross profit of Rs. 9,29,949/- on the gross sales of 3.23 Crore. Books of accounts have been audited by the Chartered Accountant Farm namely Sujit Mishra and Associates dated 30.09.2017. Quantitative records are duly maintained. Gross profit margine at the petrol pumps are normally ranging between Rs. 1.5 to Rs. 3 per litre for petrol and around Rs. 2 to Rs. 3 for diesel. Considering this aspect, we find that the assessee has disclosed the net profit in consonance with the generally accepted market practice and the same should be accepted as the net profit for the year. We, accordingly sustain the addition of Rs. 3,07,646/- being the net profit from petrol pump and delete the remaining amount of addition of Rs. 2,59,70,084/- and partly allow the grounds of appeal raised on merits of the case. Invocation of Section 115BBE - Since the alleged cash deposits are on account of business activity carried out by the assessee and has been duly explained and no addition has been sustained u/s 69A provisions of Section 115BBE of the Act will have no application. Appeal filed by the assessee is partly allowed.

Summary

Issues:
Appeal against order u/s 250 of the Income Tax Act, 1961 for AY 2017-18; Validity of assessment order u/s 147 r.w.s. 144 r.w.s. 144B; Alleged unexplained cash deposits during demonetization period; Delay in filing appeal before CIT(A); Invocation of Section 115BBE of the Act; Ex-parte order by CIT(A).

Analysis:
The appeal was filed against the order passed u/s 250 of the Income Tax Act, 1961 for the Assessment Year 2017-18, challenging the assessment order framed u/s 147 r.w.s. 144 r.w.s. 144B. The appellant raised various grounds of appeal, contesting the dismissal of the appeal by the CIT(A) and the assessment of income at a higher amount due to alleged unexplained cash deposits in the bank account during the demonetization period. The appellant also challenged the invocation of Section 115BBE of the Act, the reopening of assessment proceedings, and the ex-parte order passed without proper opportunity for hearing.

The main grievance in the appeal was regarding the confirmation of the addition made by the Assessing Officer (AO) for alleged unexplained cash deposits in the bank account of the appellant's sole proprietorship concern. The appellant contended that the delay in filing the appeal before the CIT(A) should have been condoned, and the addition u/s 69A of the Act should not have been confirmed. The appellant argued that all cash deposits were duly accounted for in the regular books and were part of total sales shown in audited financial statements.

The appellant submitted detailed documents, including bank statements, ledger accounts, and notifications supporting the claim that the cash deposits were from legitimate sales at the petrol pump. The Tribunal found that the appellant had successfully demonstrated the business activity of running a petrol pump allotted by a public sector undertaking. The Tribunal noted that the cash deposits were utilized for business transactions, and the net profit declared was in line with market practices. Consequently, the Tribunal sustained the addition of the declared net profit and deleted the remaining amount of the addition, partly allowing the grounds of appeal raised on the merits of the case.

The Tribunal held that since the alleged cash deposits were explained as part of legitimate business activity, the provisions of Section 115BBE of the Act were not applicable. Accordingly, certain grounds of appeal were partly allowed, while others were dismissed or not pressed. The appeal filed by the assessee was partly allowed based on the detailed analysis and evidence presented during the proceedings.