2025 (2) TMI 1762

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.... facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of assessing officer in making addition of Rs. 2,91,33,793/- by estimating net profit at the rate of 2% of the total turnover after rejection of books of accounts. 3. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of assessing officer in making the addition of Rs. 54,00,000/- on account of unexplained credit u/s. 68 of the Act being cash deposited in bank account during demonetization period. 4. On the facts and circumstances of the case as well as law on the subject, the learned assessing officer has erred in invoking S. 115BBE on addition of Rs. 54,00,000/- instead of taxing the same as business income. 5. Even otherwise on the facts and circumstances of the case as well as law on the subject, the assessing officer has erred in taxing the income of Rs. 54,00,000/- u/s 115BBE @ 77.25 % in a retroactive manner by applying the duly substituted S.115BBE inserted retrospectively instead of taxing it at 35.54 % as per the old provisions of S.115BBE. 6....

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....of the cash balance on hand consistently maintained by the assessee for the past three years. For the purpose of making addition of cash deposits of Rs. 54 lakhs, ld Assessing Officer incorrectly assumed that it was made out of cash sales during the demonetization period. Opening cash in hand as on 01.04.2016 itself was Rs. 59,45,284/- and further accumulated with cash received from debtors and after meeting expenses, cash in hand available on the eve of demonetisation i.e. 08.11.2016 was Rs. 54,58,651/-. Details of monthly cash balance at the end of each month is tabulated below: Month Cash Balance as at the end of the month (in Rs. /-) October 2015 39,23,896/- November 2015 52,00,319/- December 2015 53,93,017/- January 2016 48,11,378/- February 2016 50,34,344/- March 2016 59,45,284/- April 2016 61,13,470/- May 2016 56,56,197/- June 2016 59,24,546/- July 2016 62,96,618/- August 2016 66,81,963/- September 2016 60,15,860/- October 2016 54,78,994/- 3.4. Below is tabulated ratio of cash sales to total sales which would help to appreciate the facts better on basis of papers filed at Pg No 524 to 526 ....

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.... (a) Contribution to Employee's Provident Fund of Rs. 45,408/- u/s. 36(1)(va) on the ground it was paid after the prescribed due date. (b) Cash deposits in bank account during demonetization period of Rs 54,00,000 as unexplained cash credit u/s 68 of the IT Act, 1961 (c) Estimation of net profit @ 2% on total turnover of Rs. 2,91,33,793/- on ground that the sale register is not reliable. 4. Aggrieved by the additions/disallowances, assessee is in appeal before the Tribunal, for issues at (b) and (c), since ld. CIT(A) confirmed the said additions. 5. We have heard both the parties and perused the material on record. We have also gone through the paper book and synopsis furnished before us. On the first issue relating to rejection of books of account by the ld. Assessing Officer, we note that the only reason cited by ld. Assessing Officer is that assessee furnished computerised copies of cash sales invoices from tally software vide submission letter dated 15.12.2019. This submission was uploaded by the assessee on the ITBA portal which has a limitation on the size of the file which can be uploaded. This submission made by assessee was followed by anoth....

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.... books of accounts regularly maintained by it has been accepted by the Department in the past, where those years were subjected to scrutiny assessment including Assessment Year 2012-13, 2013-14 and 2014-15. Assessee placed assessment orders for these years in the paper book. Basis applied by ld. Assessing Officer for rejecting the books of accounts in the given set of documentary evidences placed on record and explanation furnished by the assessee as discussed above does not justify the action of rejection of books of accounts, which is not in consonance with provisions contained in section 145 of the Act. 5.3. Furthermore, we note that ld. Assessing Officer has not brought on record any comparable case to adopt net profit rate of 2% except for making a general statement that net profit rate of 2% is estimated which is as per the industry norms of manufacturing business similar to manufacturing business of assessee. Adopting rate of 2% for calculating net profit does not reflect the source from where it is taken and what industry standard has been applied to make the said addition. Accordingly, ground no.1 and 2 raised by the assessee are allowed, resulting in accepting the book....