2023 (11) TMI 739 - AT - Income Tax

Net profit determination - DR submitted that in the line of business of the assessee, the net profit is not less than 8% and, therefore, the learned Assessing Officer rightly estimated the same - HELD THAT - According to the assessee, the commission he gets in fertilizer business itself is less than 8% and after meeting the expenditure, his net profit is around 3% of gross sales; whereas according to the Revenue, estimation of net profit @8% is reasonable. Neither of them produced any evidence to support their figures. Keeping in view the smallness of amount involved, we deem it just and proper not to restore the issue to the file of the learned Assessing Officer to conduct the entire exercise of assessment de novo, but instead, it is better to put a quietus to the issue by taking a pragmatic view as to the net profit in this case. We deem it reasonable to adopt the net profit @6% and it would meet the ends of justice. direct the learned Assessing Officer to adopt net profit in this case @6% of the gross sales. Addition u/s 69A - deposits into bank cash including demonetized currency - HELD THAT - Assessing Officer does not dispute the genuineness of deposit of cash in the entire year and during demonetization period. The natural inference that must have been drawn by the learned Assessing Officer is that such cash forms part of the gross sales. Then, there is no reason for the learned Assessing Officer to dispute the genuineness merely because it was in specified notes. Revenue does not say that there was no cash in hand in the business conducted by the assessee. In these circumstances, having regard to the volume of business and also cash deposits in the entire year and also during the demonetization period relating to such business, there is no reason not to believe that the deposits in specified notes was also part of cash sales. Since the net profit is estimated, this particular deposit cannot be brought to tax separately. Hence, the learned Assessing Officer is directed to delete the same. Appeal of the assessee is allowed in part.

Summary

Issues involved:
The issues involved in the judgment are related to the estimation of income by the Assessing Officer based on cash deposits during demonetization, treatment of unexplained cash deposits, and the adequacy of opportunities granted to the assessee during the assessment proceedings.

Estimation of Income:
The Assessing Officer estimated the income of the assessee at 8% of gross sales due to the absence of a filed income tax return and audited statement. The CIT(A) upheld this estimation as the assessee failed to prosecute the appeal and provide material to contradict the findings. The appellant argued that the net profit should be accepted at 3% due to the nature of the fertilizer business and requested a fair opportunity to cooperate. The Tribunal, considering the lack of evidence from both sides, decided to adopt a net profit rate of 6% instead of 8% to conclude the assessment.

Treatment of Unexplained Cash Deposits:
The Assessing Officer treated the cash deposits made by the assessee during demonetization, including a specific amount in specified notes, as 'unexplained' and brought it to tax under section 69A of the Income Tax Act. The Tribunal, after examining the details of cash sales and deposits, concluded that the specified notes deposit was part of cash sales and should not be taxed separately. Therefore, the Tribunal directed the Assessing Officer to delete the addition related to the specified notes deposit.

Adequacy of Opportunities Granted:
The appellant contended that inadequate opportunities were granted during the faceless assessment proceedings, leading to exparte proceedings. The Tribunal noted the lack of evidence presented by both parties and decided on the assessment based on the available information. The Tribunal allowed the appeal in part, adjusting the net profit rate and directing the deletion of the specified notes deposit from taxation.

Separate Judgement:
The judgment was delivered by Shri K. Narasimha Chary, Judicial Member of the Appellate Tribunal ITAT Hyderabad.