2023 (9) TMI 105 - AT - Income Tax

Estimation of income @8% of gross receipts - as argued AO has not brought any comparable cases in the line of business with such high rate of profit, thus pleaded to estimate the income on gross receipts @2% in view of the principles of natural justice - HELD THAT - As undisputed notices were issued on the assessee, but the assessee did not respond to the notices issued by the department. Hence, the assessee s case was dismissed ex-parte by the lower authorities. On careful examination of the facts and circumstances of the case and business model of the assessee,we direct the AO to estimate the profit @6% on gross turnover. Assessee ground are partly allowed. Levy of interest u/s 234B - As submitted by the Ld.DR, charging of interest is consequential and interest is mandatory and not discretionary as held by the Hon ble Supreme Court in the case of Anjuman H Ghaswala 2001 (10) TMI 4 - SUPREME COURT and also the decision of CIT Vs. Hindustan Bulk Carriers 2002 (12) TMI 10 - SUPREME COURT Therefore, direct the AO to restrict the charging of interest on the profit estimated @6% on gross turnover. Hence, the ground raised by the assessee is partly allowed.

Summary

Issues involved:
The issues involved in the judgment are related to the assessment of income tax for the Assessment Year 2017-18, specifically focusing on the estimation of income based on cash deposits, non-compliance with notices, and levy of interest under section 234B.

Estimation of Income based on Cash Deposits:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) which upheld the Assessing Officer's decision to treat cash deposits as business income and estimate profit at 8% of turnover. The appellant argued that the estimation was too high and requested a lower percentage. The Tribunal directed the AO to estimate profit at 6% on gross turnover, partially allowing the appellant's grounds.

Non-Compliance with Notices:
The appellant failed to respond to notices issued by the department, leading to the dismissal of the case ex-parte by the lower authorities. The appellant claimed that non-compliance was unintentional due to the closure of business and vacation of premises. The Tribunal considered the circumstances and directed the AO to estimate profit at 6% on gross turnover instead of the initial 8%.

Levy of Interest under Section 234B:
The appellant challenged the levy of interest under section 234B, arguing that it was not correct in the circumstances of the case. The Tribunal noted that charging interest is mandatory and not discretionary, citing relevant court decisions. However, the Tribunal directed the AO to restrict the charging of interest based on the profit estimated at 6% on gross turnover, partially allowing the appellant's ground.

Separate Judgment by Judge:
The judgment was delivered by Shri Duvvuru Rl Reddy, Hon'ble Judicial Member.