2025 (3) TMI 409 - AT - Income Tax

Assessee's business model as liquor procurement facilitator confirmed with 10% profit estimation on bank deposits

The Income Tax Officer, Ward-1, Warangal. Versus Shri Sathish Ponnam

ITAT Hyderabad upheld CIT(A)'s decision treating assessee as facilitator providing services to liquor merchants for online applications and procurement ... Unexplained cash credits u/sec.68 - estimation of 10% profit on total cash deposited into bank account - HELD THAT:- The assessee has treated the amount received from various parties as his income and amount transferred to Telangana State Breweries Corporation Limited as his expenses and net commission income has been treated as his income. This fact is further strengthened by statements recorded by AO from various persons from whom the assessee claimed to have received cash for online submission of the application and online payment of purchases for liquor from Telangana State Breweries Corporation Limited. Assessee is providing services to various persons who are not aware of process of online submission of application form and online procurement of liquor from Telangana State Breweries Corporation Limited. Therefore, assessee is into the business of providing services to various liquor merchants and earned commission. CIT(A) after considering all the relevant facts has rightly treated the assessee as a facilitator and considered the total cash credits/deposits in the bank account as his business receipts and estimated @ 10% profit on total credits appearing in the bank account. The finding of fact recorded by the learned CIT(A) is uncontroverted by the Revenue, except stating that the learned CIT(A) has accepted the argument of the assessee in light of certain additional evidences contrary to Rule 46A of I.T. Rules, 1962. Whatever evidences considered by the learned CIT(A) were already on record before the AO and, therefore, in our considered view, it is not a case of violation of Rule 46A of I.T. Rules, 1962 as alleged by the DR. There is no error in the reasons given by the CIT(A) in estimating the profit @ 10% on total credits appearing in the bank account of the assessee. - Decided against revenue. The appeal in this case was filed by the Revenue against the order of the learned CIT(A)-National Faceless Appeal Centre relating to the assessment year 2016-2017. The assessee, an individual engaged in the business of providing bank facilities for liquor merchants, filed his income tax return showing a gross total income of Rs. 7,15,882/- and net income of Rs. 5,65,880/- earned through commission after claiming deductions under Chapter-VIA. The Assessing Officer, upon verifying bank statements, noted cash deposits totaling Rs. 3,44,85,085/- in two bank accounts of the assessee. As the assessee failed to prove the identity, genuineness, and creditworthiness of these cash deposits, the Assessing Officer treated them as unexplained cash credits under section 68 of the Income Tax Act, 1961.The assessee appealed to the CIT(A), who considered the nature of the assessee's business as trading in liquor and directed the Assessing Officer to treat 10% of the total purchases as business income. The Revenue appealed to the Tribunal with grounds related to the CIT(A)'s decision. The Revenue argued that the CIT(A) erred in granting relief to the assessee based on submissions without allowing examination of additional evidence, in directing the estimation of income at 100% of purchases without sufficient proof, and in treating the bank account entries as liquor purchases without valid evidence.During the hearing, the Revenue sought condonation of a 28-day delay in filing the appeal, which was granted by the Tribunal. The Revenue contended that the CIT(A)'s order should be set aside, relying on the Assessing Officer's findings. The assessee, on the other hand, provided evidence, including affidavits and ITR returns of parties, to support the nature of his business as providing services to liquor traders. The CIT(A) had considered these facts and estimated the profit at 10% of the total turnover.The Tribunal, after considering the arguments and evidence presented, upheld the CIT(A)'s decision. It found that the assessee acted as a facilitator for liquor dealers, providing services for obtaining licenses and purchasing liquor, and the cash deposits were treated as turnover from business. The Tribunal agreed with the CIT(A)'s reasoning and rejected the Revenue's grounds of appeal. Consequently, the appeal of the Revenue was dismissed.In conclusion, the Tribunal affirmed the CIT(A)'s order, emphasizing the nature of the assessee's business as a facilitator for liquor traders and supporting the estimation of profit at 10% of the total turnover. The Tribunal found no error in the CIT(A)'s decision and dismissed the Revenue's appeal.