Tribunal upholds 6% gross profit estimation on turnover from bank deposits lacking documentary evidence

ITAT Visakhapatnam upheld CIT(A)'s direction to estimate gross profit at 6% of turnover from bank deposits. The assessee failed to provide documentary evidence proving that all credits were not turnover, despite claiming a variation of Rs. 63,27,044. Without books of account, bills, or vouchers to substantiate cash deposits, the tribunal found no infirmity in reducing the AO's original 8% estimation to 6%. The assessee's appeal was dismissed.

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Issues involved:
The issues involved in this case are related to the assessment of income u/s 144 of the Income Tax Act, 1961 for the AY 2017-18, specifically concerning substantial cash deposits during the demonetization period, estimation of gross profit, and penalty proceedings u/s 270A of the Act.

Assessment of Income u/s 144:
The assessee, a Firm engaged in distribution, had substantial cash deposits during the demonetization period. The Ld. AO observed non-compliance with notices and lack of verifiable evidence for the cash deposits. The assessment was completed u/s 144, estimating income @ 8% of total cash credits. The Ld. CIT(A)-NFAC partly allowed the appeal, estimating gross profit @ 6% due to lack of documentary evidence justifying actual profits. The Tribunal upheld the Ld. CIT(A)-NFAC's decision, emphasizing the assessee's failure to substantiate claims with evidence.

Estimation of Gross Profit:
The Ld. AR argued that all bank credits were not turnover, citing a variance of Rs. 63,27,044 between total sales and credits. The Ld. CIT(A)-NFAC directed the Ld. AO to estimate gross profit @ 6% instead of 8%, considering the assessee's lower GP rates in previous years. The Tribunal found the Ld. CIT(A)-NFAC's decision reasonable, as the assessee failed to provide documentary evidence supporting claims or justifying lower GP rates.

Penalty Proceedings u/s 270A:
The Ld. AO initiated penalty proceedings u/s 270A due to misreporting of income. The Tribunal's decision to dismiss the appeal indicates that the Ld. CIT(A)-NFAC's order did not warrant interference, as the assessee did not meet the burden of proof and failed to substantiate claims with verifiable evidence. The Tribunal upheld the estimation of income and gross profit, emphasizing the importance of providing documentary evidence to support claims during assessments.

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