Appeal success: Limits added investment as profit, considers pandemic delay.

The appeal was filed against the order of the National Faceless Appeal Centre for the Assessment year 2012-13. The delay in filing the appeal was condoned due to the Covid-19 pandemic. The Assessing Officer added an amount as unexplained investment under Section 69, which was upheld. The Tribunal directed the Assessing Officer to consider 7% of total deposits as profit from business activities. The Tribunal allowed the appeal in part, restricting the addition to 7% of the credit in the bank account as the profit element.

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Issues Involved:
1. Condonation of delay in filing appeal.
2. Validity of reopening assessment.
3. Addition of unexplained investment under Section 69.
4. Justification of cash deposits in bank account.
5. Determination of profit element in business activities.

Issue 1: Condonation of delay in filing appeal:
The appeal by the assessee was directed against the order of the National Faceless Appeal Centre for the Assessment year 2012-13. The delay in filing the appeal was due to the Covid-19 pandemic, and the assessee filed the appeal within the grace period allowed by the Supreme Court. The delay was condoned following the directions of the Honorable Apex Court.

Issue 2: Validity of reopening assessment:
The Assessing Officer reopened the case due to cash deposits in the bank account without filing the return of income for A.Y. 2012-13. The reasons for reopening were provided to the assessee, who claimed to be engaged in the business of "Lapsi." However, the Assessing Officer added an amount as unexplained investment under Section 69, which was upheld by the CIT(A) due to the lack of evidence regarding the business. The grounds related to the validity of reopening were not pressed by the assessee and dismissed accordingly.

Issue 3: Addition of unexplained investment under Section 69:
The Assessing Officer added the entire cash and cheque deposits in the bank account as unexplained investment. The assessee contended that the deposits were from the sale of "Lapsi" and requested a reasonable estimation of income. The Tribunal considered the traditional business background of the assessee and directed the Assessing Officer to consider 7% of the total deposit as profit from the business activities, following legal precedents.

Issue 4: Justification of cash deposits in bank account:
The Tribunal found merit in the submission that the assessee was engaged in a small business activity, leading to the deposits in the bank account. It was observed that the deposits and withdrawals indicated unreported business transactions. Therefore, only the profit element from the business activities generating the credit in the bank account was considered for taxation, rather than the entire amount deposited.

Issue 5: Determination of profit element in business activities:
Based on the traditional business background of the assessee and legal precedents, the Tribunal directed the Assessing Officer to restrict the addition to 7% of the credit in the bank account, considering it as the profit element. Consequently, grounds related to the addition were allowed, and the appeal was partly allowed.

This detailed analysis covers the various issues involved in the legal judgment delivered by the Appellate Tribunal ITAT SURAT.

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