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TMI Blog2025 (1) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... ying out the same business a part of which was not disclosed to the Department. It is also possible that part of the profit of his disclosed business was diverted and the amounts were deposited in the SB account. However, it is seen that the appellant has also made multiple withdrawals of almost the same amounts during the year. In absence of any evidence, it cannot be ascertained whether the amounts withdrawn were used for purchase of vegetables or were used for personal expenses or investments. Hence, a reasonable estimate of cash deposit may be considered as income of the assessee. In our view, it will be fair and reasonable if 25% of the cash deposit of is taken as the income of assessee. Estimation of profit @ 8% by the CIT(A) in lieu of profit @ 35% by the AO on the turnover - Appellant has not disclosed all credit entries even of his disclosed bank account. The appellant has not brought anything on record to show that the nature of the other credit entries are different from sales made by assessee and they are not tenable. Hence, the total credit entries are held to be sales of the assessee during the year. As assessee himself has shown profit @ 8% of the turnover in his ROI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee in ITA No. 329/SRT/2024 for AY 2011-12, treated as lead case, are as follow: 1. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A). 2. On the fact and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in partly confirming the actions of Assessing Officer by sustaining the addition at 8% of the estimated turnover of Rs. 89,63,222/-. 3. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of Assessing Officer in making addition of Rs. 13,20,535/- on account of alleged unexplained cash deposit. The CIT(A) ought to have estimated the profit at reasonable percentage on the total estimated turnover of RTs.1,02,83,757/- (Rs.13,20,535 + Rs. 89,63,222) instead of making addition of 100% of cash deposit of Rs. 113,20,535/-. 4. It is therefore prayed that the assessment framed u/s 143(3) r.w.s. 147 may please be quashed and/or additions made by the Assessing Officer and confirmed by the learned CIT(A) may please be deleted. 5. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of the h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 35% estimated by the AO on the total credits of Rs. 1,02,83,757/- (Rs.89,63,222 + Rs. 13,20,535/-). Without prejudice to the above, the appellant submitted that addition can be made only to the extent of peak credit and profit @ 2% on total credits could be estimated after date of peak credit. The CIT(A) has observed that reopening notices were issued because assessee had not disclosed in his return of income the Savings bank account where there are cash deposits of Rs. 13,20,535/- in AY 2011-12 and Rs. 34,92,210/- in AY 2013-14. The CIT(A) dismissed the ground at para-5.2 of his order by stating that there is no infraction regrading jurisdiction of the AO. There is also no violation of law on part of the AO. Regarding cash deposit, the CIT(A) has relied on the decisions of Hon ble Supreme Court in cases of : (i) Sreelekha Banerjee vs. CIT (1953) 49 ITR 112, 117, (ii) Seth Kalekhan Md. Hanif vs. CIT (1963) 50 ITR 1, (iii) M.A. Unneeri Kutty vs. CIT (1992) 198 ITR 147, 150 (Ker.) SLP dismissed by Hon ble Supreme Court (1993) 201 ITR (St.), (iv) Sumati Dayal vs. CIT (1995) 214 ITR 801 and (v) CIT vs. P. Mohankala (2007) 291 ITR 278. The CIT(A) observed that apart from some sample bi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . He submitted that the profit on the credit entries in the Current account may be decided by the Bench. 6. We have heard both the parties and perused the materials on record. We have deliberated the case law relied by Ld.AR of the assessee. Ground No.1 pertains to the order of CIT(A) in confirming the action of AO in reopening assessment u/s 147 by issuing notice u/s 148 of the Act. The CIT(A) has dismissed the ground because no infraction regarding jurisdiction of AO has been brought on record. He also did not find any violation of law by the AO. Though the ground of reopening has been raised in the instant appeal, the issue was not seriously contested during the hearing before the Tribunal. 6.1 We have carefully considered the facts on record. There is no dispute that the SB account maintained with Bank of Baroda, where cash of Rs. 13,20,535/- was deposited, has not been disclosed by the assessee in his return of income. It has been held in a number of cases that there should be prima facie reason at the initial stage of reopening. The sufficiency or correctness of the reason cannot be examined at the threshold. The conclusion or conclusive establishment of escaped income is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see mentioned in the preceding para of this order. Both AO and CIT(A) have given concurrent finding that the nature and source of cash deposit has not been duly explained by the assessee. The CIT(A) has observed that it was the duty of appellant to explain not only the credits but also the debits. The assessee has not brough on record the sale register, delivery challans, audit report u/s 44AD of the Act, quantitative details of sales in the stock register, sales in VAT/GST/Excise record and chart showing withdrawals and deposits in the bank account. Hence, the addition was confirmed by CIT(A). Before us, the Ld. AR of the assessee submitted that both cash deposits and other entries in both the accounts should be considered together and profit may be estimated. The Ld. Sr-DR for the Revenue, on the other hand, requested that the addition of cash deposit may be sustained. 7.1 We have considered the rival submissions and perused the record carefully. We find that the assessee was engaged in the wholesale business of purchase and sale of vegetables during the year under consideration. It has shown net profit of Rs. 2,59,112 /- on total turnover of Rs. 32,34,156/-. We find that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hdrawn were used for purchase of vegetables or were used for personal expenses or investments. Hence, a reasonable estimate of cash deposit may be considered as income of the assessee. In our view, it will be fair and reasonable if 25% of the cash deposit of Rs. 13,20,535/- is taken as the income of assessee. The AO is, therefore, directed to add Rs. 3,30,134/- and delete the remaining amount. This ground of assessee is partly allowed. 8. Next ground is estimation of profit @ 8% by the CIT(A) in lieu of profit @ 35% by the AO on the turnover of Rs. 89,63,222/-, as evident from the Current account of assessee with Bank of Baroda. The Ld. AR of the assessee has relied on the decision in case of Shri Y. Jaya Prakash (supra). The Ld. Sr-DR for the Revenue, on the other hand, submitted that the Bench may take a reasonable view on the subject issue. 9. We have heard both the parties and perused the materials on record. We have also deliberated the decisions relied upon by Ld. AR of the assessee. As stated earlier, assessee has shown turnover of Rs. 32,34,156/- on which it has shown profit of Rs. 2,59,112/-, which is @ 8% of the turnover. However, the credit entries in the Current account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort before due date of filing the return, i.e., 30.09.2011. The assessee failed to do so. Hence, assessee was liable to penalty u/s 271B of the Act for failure to get his accounts audited on or before due date. The AO issued show cause notice requesting assessee to explain as to why order imposing penalty u/s 271B of the Act be not passed. Neither the assessee attended nor did he furnish any written submission. Therefore, the AO levied penalty @ 0.5% of the turnover of Rs. 44,57,662/-. It seems that AO has wrongly taken the total addition of Rs. 44,57,662/- as the turnover instead of the actual turnover of Rs. 89,63,2212/-. This is clear from the assessment order as well as the grounds of appeal raised by the assessee before CIT(A). 14. Aggrieved by the penalty of the AO, assessee filed appeal before CIT(A). It was submitted that assessee was not aware of the provisions of Sec. 44AB of the Act and hence, failed to conduct any audit from Chartered Accountant. He submitted that ignorance of law can be a reasonable cause for the above failure. It was submitted that assessee has shown turnover of Rs. 32,34,156/- but AO has considered credit of Rs. 89,63,222/- as estimated turnover. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n record. We have also deliberated the decisions relied upon by both sides. We find that the AO has wrongly taken the turnover at Rs. 44,57,662/- which was the total addition made by him and not the turnover on which he estimated profit @ 35%. This is also clear from the ground of the appellant before the CIT(A) where the turnover is shown at Rs. 89,63,222/-. The assessee had contended before CIT(A) that he was not aware of provisions of Section 44AB of the Act and hence he failed to conduct any audit from the Chartered Accountant. The appellant had also relied on some decisions which have been considered by CIT(A). However, the reasons as advanced by the assessee was not considered a reasonable cause by the CIT(A). He has relied on the decisions of Hon ble Supreme Court in case of Wipro Ltd. (supra). We find that apart from stating that the assessee was not aware of provisions of Section 44AB of the Act, no other reason has been advanced by the assessee. We are of the view that the reason given by the assessee that he was not aware of provisions of section44AB of the Act would not constitute reasonable cause u/s 273B of the Act. The Hon ble Supreme Court in case of Wipro Ltd. (sup ..... X X X X Extracts X X X X X X X X Extracts X X X X
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