Appeals partly allowed with revised profit rate, penalties deleted for reasonable cause

The Tribunal partly allowed the appeals, directing the AO to apply a net profit rate of 1.5% on the turnover and deleted the penalties imposed under section 271(1)(b) due to reasonable cause for non-compliance with notices.

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Issues Involved:

1. Dismissal of the appeal by CIT(A) under section 250(6) of the Income Tax Act.
2. Confirmation of addition of Rs. 10,95,406/- by estimating 5% profit on cash deposits.
3. Levy of penalty under section 271(1)(b) for non-compliance with notices.

Summary:

1. Dismissal of the Appeal by CIT(A) under section 250(6):
The appellant argued that the CIT(A) erred in dismissing the appeal and sustaining the addition made by the AO without examining the merits of the case. The CIT(A) passed an ex-parte order confirming the addition made by the AO without adjudicating the case on merits due to the appellant's failure to respond to notices.

2. Confirmation of Addition of Rs. 10,95,406/- by Estimating 5% Profit on Cash Deposits:
The appellant contended that the CIT(A) erred in confirming the addition of Rs. 10,95,406/- by estimating a 5% profit on cash deposits in the ICICI Bank Account, without considering that the appellant is a Kachha Ahartiya dealing as a commission agent of fresh vegetables. The standard commission rate in such trade is 1%, subject to further reduction on account of expenses. The Tribunal observed that the appellant, being a Kachha Ahartiya, only acts as an agent and earns commission from the sale of fruits/vegetables. The CBDT Circular No. 452 dated 17.03.1986 clarifies that for Kachha Arahtiyas, only the commission should be considered while working out the turnover. The Tribunal directed the AO to apply a net profit rate of 1.5% instead of 5% on the total turnover estimated at Rs. 2,53,27,125/-.

3. Levy of Penalty under Section 271(1)(b) for Non-Compliance with Notices:
The appellant challenged the CIT(A)'s orders confirming the levy of penalties under section 271(1)(b) for non-compliance with notices. The appellant argued that the non-compliance was due to reasons beyond control, such as the death of the accountant whose email was registered for correspondence. The Tribunal noted that the imposition of penalty under section 271(1)(b) is discretionary and not mandatory, provided there is a reasonable cause for the failure. Considering the nationwide COVID pandemic and the death of the accountant, the Tribunal found reasonable cause for the non-compliance and deleted the penalties imposed under section 271(1)(b).

Conclusion:
The Tribunal partly allowed the appeals, directing the AO to apply a net profit rate of 1.5% on the turnover and deleted the penalties imposed under section 271(1)(b) due to reasonable cause for non-compliance with notices.

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