2025 (3) TMI 148 - AT - Income Tax

Unexplained investments u/s 69 - Estimation of income at the rate of 8% on total deposit in bank account and cash deposit in the bank accounts of the assessee - HELD THAT - We find that the assessee is running a cold storage and receiving rentals for renting out the space. During the year the assessee s total receipt was 1, 80, 64, 642/- and total expenses was 1, 80, 52, 273/- and thus the net profit was only 12, 368/-. We note that the assessee has incurred huge expenses on the electricity and various other expenses which aggregated to 1, 80, 52, 273/-. We have also observed from the perusal of the bank statements of the two banks that assessee at no point of time has any substantial money accumulating in these bank accounts. Therefore the theory invoked by the ld. AO that assessee has unexplained investments u/s 69 of the Act is wrong and against the facts on record. It is only for this reason the addition made by the ld. AO u/s 69 of the Act is ordered to be deleted by setting aside the order of ld. Commissioner of Income-tax (Appeals). Second addition on estimation - We note that the ld. AO has applied 8% on other deposits in the bank accounts/ aggregate to 71, 62, 220/-. We observe from the profit and loss account that the assessee has a very meagre profit of 12, 368/- and therefore such estimation which is devoid of any basis cannot be sustained. Accordingly the addition made by the ld. AO is ordered to be deleted by setting aside the order of ld. CIT (A) and the appeal of the assessee is allowed.

Summary

The appeal in this case was filed by the assessee against the order of the National Faceless Appeal Centre for the Assessment Year 2017-18. The main issue revolved around the confirmation of additions made by the Assessing Officer and upheld by the Commissioner of Income Tax (Appeals) regarding the estimation of income based on deposits in the assessee's bank accounts.The primary contention was the addition of 5,72,978/- and 1,62,88,300/- by the Assessing Officer for estimating income at the rate of 8% on total deposits in the bank accounts. The assessee, engaged in renting cold storage, did not file a return of income despite notices. The Assessing Officer noted significant cash deposits during demonetization and throughout the financial year, suspecting undisclosed income. The Commissioner of Income Tax (Appeals) dismissed the appeal as the assessee failed to provide written submissions.The assessee argued that the assessment was flawed as no additions were explicitly made, challenging the invocation of Section 69 of the Income Tax Act for unexplained investments. The assessee highlighted operational expenses, meager profits, and regular withdrawals for expenses, disputing the Assessing Officer's conclusions. The Revenue contended that the assessee's non-cooperation rendered the arguments meritless.The Appellate Tribunal found that the assessee's business operations incurred substantial expenses, leaving minimal profits. Bank statements revealed no significant accumulations, contradicting the Assessing Officer's theory of unexplained investments under Section 69. Consequently, the addition under Section 69 was deemed incorrect and deleted. Regarding the 8% estimation on other deposits, the Tribunal ruled that the Assessing Officer's arbitrary estimation lacked a reasonable basis given the meager profits. Thus, this addition was also deleted, and the appeal of the assessee was allowed.In conclusion, the Tribunal set aside the orders of the lower authorities, deleting the additions made by the Assessing Officer and the Commissioner of Income Tax (Appeals) based on insufficient reasoning and lack of factual support. The appeal of the assessee was allowed, and the judgment was pronounced on 28.02.2025.