ARULAPPAN SOOSAI,NILIGRIS V. ITO, WARD 1, OOTY, OOTY

ITA 2169/CHNY/2025

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The case involves Arulappan Soosai Arulappan, who appealed against the order of the Commissioner of Income Tax (Appeals) for the Assessment Year 2021-22. The primary issues in the appeal were the estimation of business income at 8% under Section 44AD of the Income Tax Act, contrary to the 6% rate applied in similar cases, and the addition of Rs.5,35,000 as unexplained income under Section 69A. The Tribunal found that the assessee's business receipts were entirely through prescribed banking channels, warranting the application of the lower presumptive rate of 6%. Furthermore, the Tribunal acknowledged the assessee's cash withdrawals and past savings as valid sources for the funds in question, leading to the deletion of the addition under Section 69A.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 783982 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2021-2022
• Appeal Filed On: 04-08-2025
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRYATI SHARMA
• Assessee Lawyers: S.SRIDHAR ERODE
• Keywords: Business income
• Section: 44AD

Judgement Text

"आयकर अपीलीय अिधकरण, ‘ए’ \u0001यायपीठ, चे ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH: CHENNAI \u0001ी मनु क ुमार िग र, ाियक सद\u0011 एवं एवं एवं एवं \u0001ी जगदीश, लेखा सद क े सम\u0014 BEFORE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND SHRI JAGADISH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.2169/Chny/2025 िनधा\u000eरण वष\u000e/Assessment Year: 2021-22 Arulappan Soosai Arulappan, 12, Thiashola Estate, Thiashola Post, Kundha Taluk, The Nilgiris-643 219. v. The ITO, Ward-1, Ooty. [PAN:DBFPS 5829 L] (अपीलाथ\u0016/Appellant) (\u0017\u0018यथ\u0016/Respondent) अपीलाथ\u0016 क\u001a ओर से/ Appellant by : Mr.S. Sridhar (Erode), Advocate \u0017\u0018यथ\u0016 क\u001a ओर से /Respondent by : Ms.Pryati Sharma, JCIT सुनवाईक\u001aतारीख/Date of Hearing : 30.10.2025 घोषणाक\u001aतारीख /Date of Pronouncement : 10.11.2025 आदेश / O R D E R PER MANU KUMAR GIRI, JM: This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals), (in short ‘the CIT(A), NFAC / Delhi dated 11.06.2025 for the Assessment Year (in short ‘AY’) 2021-22. 2. In sum and substance, the assessee has raised, inter alia, the following grounds: I. The learned CIT(A) erred in confirming the estimation of business income at 8% under Section 44AD of the Act as against 6% adopted in similar cases, Printed from counselvise.com ITA No.2169/Chny/2025 (AY 2021-22) Arulappan Soosai Arulappan :: 2 :: despite the assessee’s business receipts being entirely through prescribed banking channels. II. The learned CIT(A) further erred in sustaining the addition of Rs.5,35,000/- under Section 69A of the Act as unexplained income, without properly considering the available sources including cash withdrawals and past savings. 3. Brief facts are that the assessee, engaged in trading/export business, declared income under the presumptive provisions of Section 44AD. The Assessing Officer, however, estimated business income at 8% of the turnover instead of 6%, and also made an addition of Rs.5,35,000/- under Section 69A treating the same as unexplained income. The ld.CIT(A) upheld the assessment. Aggrieved, the assessee is now before the Tribunal. 4. Ground No. I as referred supra – Estimation of income at 8% instead of 6%: The learned Authorised Representative (AR) submitted that the assessee’s entire business receipts were through banking channels, and hence the benefit of the lower presumptive rate of 6% under Section 44AD(1) proviso ought to have been granted. It was argued that the Assessing Officer, having invoked Section 44AD, should have applied the provision as a whole and not selectively estimated at 8%. Copies of export bills and bank statements were produced before both the lower authorities. Printed from counselvise.com ITA No.2169/Chny/2025 (AY 2021-22) Arulappan Soosai Arulappan :: 3 :: 5. Per contra, the learned Departmental Representative (DR) supported the orders of the lower authorities and pleaded for the dismissal of the appeal. 6. We have considered the rival submissions and perused the material on record. Section 44AD(1) proviso clearly provides that where turnover or gross receipts are received through prescribed banking channels, income shall be deemed to be 6% of such turnover. The authorities below have not disputed that all receipts were through banks. In such circumstances, estimation at 8% is unjustified. Accordingly, we direct the Assessing Officer to adopt 6% as the presumptive rate under Section 44AD. This ground of appeal is therefore allowed. 7. Ground No.II as referred supra – Addition under Section 69A of Rs.5,35,000/-: This issue relates to the addition of Rs.5,35,000/- as unexplained money. The assessee contends that the authorities below failed to consider cash withdrawals of Rs.2,97,500/- during the year and the past savings and returned income of preceding years (Rs.4,35,660/- and Rs.5,87,160/- for AYs 2019–20 and 2020–21 respectively). The assessee produced bank extracts before the ld.CIT(A) showing the withdrawals corresponding to the deposits, but the ld.CIT(A) rejected the explanation for want of purchase/sales vouchers. Printed from counselvise.com ITA No.2169/Chny/2025 (AY 2021-22) Arulappan Soosai Arulappan :: 4 :: 8. Having considered the facts, we note that the assessment itself is based on bank statements, and no discrepancy in withdrawals has been pointed out. When such withdrawals and past income are demonstrated, addition under Section 69A cannot be sustained to that extent. Accordingly, we direct the Assessing Officer to delete the addition of Rs.2,97,500/- being covered by cash withdrawals, and to further delete Rs.2,37,500/- on account of past savings, since the assessee had disclosed sufficient income in prior years. Thus, the entire addition of Rs.5,35,000/- is deleted. 9. In the result, the appeal filed by the assessee is allowed. Order pronounced in open Court on the 10th day of November 2025, in Chennai. Sd/- (जगदीश) (JAGADISH) लेखा सद\u0003य/ACCOUNTANT MEMBER Sd/- (मनु क ुमार िग र) (MANU KUMAR GIRI) \u0005याियक सद\u0003य/JUDICIAL MEMBER चे ई/Chennai, !दनांक/Dated: 10th November, 2025. TLN आदेश की \u000fितिलिप अ\u0014ेिषत/Copy to: 1. अपीला थ\u0017/Appellant 2. \u000f\u0018थ\u0017/Respondent 3. आयकरआयु /CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभा गीय\u000fितिनिध/DR 5. गा ड\"फा ईल/GF Printed from counselvise.com "