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TMI Blog2014 (11) TMI 406X X X X Extracts X X X X X X X X Extracts X X X X ..... nto bank accounts have to be considered as receipts from fruit business carried on by assessee - the deposits made into the bank accounts as receipts from the business of assessee. CIT(A) has observed that minimum profit rate in this line of business is 10%, ultimately, he adopted net profit rate of 15% - the net profit adopted at 15% is high - assessee has not maintained any books of account, therefore, profit of assessee in any way has to be estimated on a reasonable basis - As no comparable case in similar line of business has been brought on record, profit has to be estimated by adopting some principle - it would be appropriate to consider toadopt the net profit rate at 5%. There are not only cash deposits, but there are cash withdrawals also - Therefore, the entire cash deposits made during the year cannot be treated as income of assessee - the peak credit appearing in the bank accounts can be considered as unexplained income of assessee – the AO is directed to verify bank accounts and also examine peak credits worked out by assessee and thereafter make the addition on the basis of peak credit worked out – Decided partly in favour of assessee. - ITA No. 669/Hyd/2013, I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that assessee involved in the business of fruit sales as a facilitator for parties mostly hailing outside of Hyderabad and his job mainly is showing the markets to the agents of parties. Further explaining, assessee submitted that monies are deposited by the parties for purchase of fruits and on their behalf fruits are purchased after receipt of money into his bank account. His services are confined to purchase of goods from farmers and facilitating loading of goods with further responsibility of paying cash to the suppliers for which he gets service charge of ₹ 500 to ₹ 1000 per truck which only constitute his income. Further elaborating, assessee submitted that the cash deposits made into the bank account, are the deposits made by parties for purchase of fruits. Therefore, the said deposits being money belonging to others cannot be treated as income of assessee. Alternatively, it was submitted by assessee that even assuming that the cash deposits made into bank account are trade receipts, but, the entire amount deposited in to the bank account cannot be considered to be the income of assessee as only the profit element is the income of assessee. Assessee submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant regarding the percentage of profits as claimed and as such the affidavit as regard to the percentage of profit is not reliable. It is also a fact that in a business of this kind, the profits are not less than 10% and with the background of the business carried in cash and also the denial of the assessee on bank deposits into ICICI bank account and the incorrect information furnished by the appellant during the assessment proceedings, as well as the appellate proceedings, indicate that the margins to the appellant are much higher than what has been claimed and indicated. Keeping all these facts in mind, I am of the considered opinion that there would be a minimum profit of 15% on the gross receipts of ₹ 1,40,33,735/- related to the trade undertaken by appellant and the said rate of margin of profit is justifiable by any standard and may meet justice at both the ends. Accordingly, the profit available to the appellant on the gross receipts of 1,40,33,735/- is worked out to ₹ 21,05,060/- (@ 150/0). Thus, the addition IS confirmed to the extent of ₹ 21;05,060/- as against the addition of ₹ 33,72.365/- made by the Assessing Officer. On this basis, this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im that the cash deposits made into bank accounts can be treated as trade receipts, and only profit element can be taken as his income, but, assessee in the return of income has never admitted cash deposits as his trade receipts. In this connection, learned DR drew our attention to the return of income filed by assessee for the impugned assessment year showing a turnover of ₹ 13,11,770. Learned DR, therefore, submitted that as assessee has failed to explain the source of cash deposits made into the bank accounts, AO is justified in treating the entire cash deposits made into bank account as income of assessee. Strongly, opposing learned AR s contention for reducing net profit rate adopted by CIT(A), learned DR submitted that in the return of income and computation of income, assessee has shown net profit ₹ 1,80,000 on a turnover of ₹ 13,11,770, which comes to 13.72%, hence, net profit rate of 15% adopted by CIT(A) cannot be reduced any further. 9. In the rejoinder, learned AR submitted that before the CIT(A) assessee has adequately explained the reasons for not appearing before the AO during the assessment proceeding. With regard to the contention of the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fruit business carried on by assessee. In fact, assessee before CIT(A) has also accepted this position while contending that only the profit element embedded in such receipts can be assessed as his income. 11. Having held the deposits made into the bank accounts as receipts from the business of assessee, the next issue which arises for our consideration is the appropriate net profit rate to be applied to such receipts. As can be seen, though, learned CIT(A) has observed that minimum profit rate in this line of business is 10%, ultimately, he adopted net profit rate of 15%. However, considering the fact that assessee is in wholesale business, in our view, the net profit adopted at 15% is high. In the present case, admittedly, assessee has not maintained any books of account, therefore, profit of assessee in any way has to be estimated on a reasonable basis. As no comparable case in similar line of business has been brought on record, profit has to be estimated by adopting some principle. In this context, we refer to the provisions of section 44AF, which provides for estimation of profit at 5% in case of a person engaged in retail trade and who does not maintain any books of acco ..... 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