2023 (3) TMI 430 - AT - Income Tax

Tribunal upholds CIT(A)'s 5% net profit estimation for AY 13-14 & 15-16, dismissing Revenue's appeals

The Asst. Commissioner of Income Tax, Non-Corporate Circle-1, Chennai Versus Mr. Rangaraj Anjan Kumar

The Asst. Commissioner of Income Tax, Non-Corporate Circle-1, Chennai Versus Mr. Rangaraj Anjan Kumar - TMI Issues Involved:1. Estimation of income by the CIT(A) when the turnover exceeds 2 Crores.2. Admission of additional evidence by the CIT(A) without remand report from AO.3. Difference in turnover as per Form 26AS and books of accounts.4. Addition towards cash deposits in the bank account under Section 69A.Issue-wise Detailed Analysis:1. Estimation of Income by the CIT(A):The Revenue contended that the CIT(A) erred in estimating the income at 5% of the gross receipts when the assessee himself had estimated it at 8%. The CIT(A) justified the estimation by considering the net profit declared by the assessee in earlier years and the directions of the JCIT for the AY 2016-17, where a 5% net profit on business receipts was directed. The CIT(A) determined that the AO should have adopted a figure of 3.25% based on the weighted average of net profit ratios from previous years but accepted the assessee's agreement to a 5% estimation. The Tribunal upheld the CIT(A)'s method, finding it reasonable and dismissing the Revenue's appeal.2. Admission of Additional Evidence:The Revenue argued that the CIT(A) admitted additional evidence in the form of bills and vouchers without giving the AO an opportunity to verify them, violating Rule 46A. The CIT(A) considered the detailed submissions and sample invoices produced by the assessee, which were found to be largely in order. The Tribunal noted that the CIT(A) had considered the facts and circumstances, including the lack of proper books maintained by the assessee, and found no reason to interfere with the CIT(A)'s findings.3. Difference in Turnover as per Form 26AS and Books of Accounts:The AO identified a difference between the gross turnover reported in the books and the gross receipts as per Form 26AS. The assessee explained that the turnover reported in the books was net of all expenses, causing the discrepancy. The CIT(A) directed the AO to estimate the income at 5% of the gross receipts as per Form 26AS, considering the JCIT's directions for AY 2016-17. The Tribunal agreed with the CIT(A)'s approach, noting that the assessee's explanation was not satisfactorily supported by evidence and that the books of accounts were not properly maintained.4. Addition towards Cash Deposits in Bank Account under Section 69A:For AY 2013-14, the AO made an addition of Rs.2,54,40,084/- towards unexplained cash deposits in the bank account, treating it as income under Section 69A. The assessee claimed that the source of cash deposits was from withdrawals and receipts from customers. The Tribunal found that the assessee had withdrawals exceeding the deposits and explained the source of cash deposits. It concluded that when the AO treated the gross receipts as business turnover, further addition under Section 69A would amount to double addition. The CIT(A) had considered the total receipts, including cash deposits, for estimating the business income at 5%. The Tribunal upheld the CIT(A)'s view, finding it reasonable and consistent with the AO's approach in earlier years.Conclusion:The Tribunal dismissed the Revenue's appeals for both AY 2013-14 and AY 2015-16, upholding the CIT(A)'s estimation of 5% net profit on gross receipts and rejecting the additional grounds raised by the Revenue. The judgment emphasized the reasonableness and consistency of the CIT(A)'s approach in estimating the income and addressing the discrepancies in the assessee's turnover and cash deposits.