2023 (9) TMI 829 - AT - Income Tax

Revision u/s 263 - Assessee had deposited the cash out of cash sales of fish trading - As per CIT AO has not properly examined and simply estimated the profit at 0.75% without any basis - HELD THAT - AO issued notices and in response to the said show cause notice, he explained that since the fish is highly perishable commodity, it has to be marketed as quickly as possible and that the commission changes from person to person depending upon the bargain and therefore requested to accept the commission admitted in the return filed taking into account the expenses to be incurred in deriving the commission. Based on these findings, the AO estimated the net profit at 0.75% of gross receipts. After perusal of the assessment order, the assessing officer himself admitted that the assessee has not furnished any books of accounts, proof of evidence in the form of bills /vouchers for total quantity of fish sold to the traders through mediation during the year to ascertain actual quantity of fish sold and also price per kg. and commission derived etc. Therefore, in the absence of such bills, the AO has estimated the profit @0.75%, but he has not verified the sources for cash deposits. Therefore, we are of the view that the Ld.Pr.CIT has rightly set aside the order passed by the AO, saying that it is erroneous and prejudicial to the interest of the revenue. Therefore, we uphold the order passed by the Ld. Pr. CIT u/s 263, hence, the grounds raised by the assessee are dismissed.

Summary

Issues involved:
The appeal involves the condonation of delay in filing an appeal against the order of the Principal Commissioner of Income Tax. Additionally, it concerns the assessment order passed under section 143(3) of the Income Tax Act for the Assessment Year 2017-18, focusing on the estimation of profit, cash deposits made during the demonetization period, and low net profit compared to the preceding year.

Condonation of Delay:
The appellant filed an appeal against the order of the Principal Commissioner of Income Tax with a delay of 69 days, citing reasons related to residing in a remote village, lack of education, and being a commission agent in the fish trading business. The appellant's plea for condonation of delay was accepted by the Tribunal based on the reasonable and convincing grounds provided.

Assessment and Proceedings:
The assessment for the Assessment Year 2017-18 involved scrutiny under CASS to examine cash deposits during demonetization and low net profit compared to the previous year. The Assessing Officer (AO) estimated the profit at 0.75% against the declared 0.5%, leading to the Principal Commissioner of Income Tax invoking section 263 for revision. The Principal Commissioner found the assessment order erroneous and prejudicial to revenue due to lack of proper verification and basis for profit estimation.

Grounds of Appeal:
The appellant raised multiple grounds challenging the order passed under section 263 of the Income Tax Act. These grounds included contentions regarding due inquiry by the Assessing Officer, regularity of cash deposits from fish trading, proper verification by the AO, and the validity of invoking section 263. The appellant argued that the order passed by the Principal Commissioner was unjust and not based on correct facts.

Adjudication and Decision:
The Tribunal deliberated on the validity of the proceedings initiated under section 263, considering arguments from both the appellant and the revenue. The Tribunal observed that the AO did not properly examine the cash deposits and lacked essential details such as invoices for fish trading. As a result, the Tribunal upheld the order passed by the Principal Commissioner under section 263, dismissing the grounds raised by the appellant and ultimately dismissing the appeal.