ASHARAF,MANNANCHERY V. INCOME TAX OFFICER , ALAPPUZHA

ITA 235/COCH/2025

AI Insights

The case involves Asharaf, an individual engaged in the business of paints and hardware, who did not file a regular income tax return for the Assessment Year 2017-18. The Income Tax Officer (ITO) noticed substantial cash deposits amounting to Rs. 12,66,000 in specified bank notes during the demonetisation period and issued a notice under section 142(1) of the Income Tax Act, 1961. Asharaf responded partially, leading the ITO to estimate his business profit at Rs. 5,92,823 and add the unexplained cash deposits as income. The Commissioner of Income Tax (Appeals) upheld these decisions, prompting Asharaf to appeal to the Income Tax Appellate Tribunal, which partly allowed the appeal by deleting the addition related to the cash deposits.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 312272 (ITAT-COCHIN)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LEENA LAL
• Assessee Lawyers: BIJUMON ANTONY
• Section: 144; 142(1); 44AD

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH BEFORE SHRI INTURI RAMA RAO, AM ITA No. 235/Coch/2025 Assessment Year: 2017-18 Asharaf .......... Appellant Bismillah Manzil, Mannancherry, Alappuzha 688538 [PAN: BAGPA7886R] vs. The Income Tax Officer .......... Respondent Ward -1 & TPS, Alappuzha Appellant by: Shri Bijumon Antony, CA Respondent by: Smt. Leena Lal, Sr. D.R. Date of Hearing: 28.04.2025 Date of Pronouncement: 30.04.2025 O R D E R This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-2, Gurugram [CIT(A)] dated 17.02.2025 for Assessment Year (AY) 2017-18. 2. Brief facts of the case are that the appellant is an individual carrying on the business of pains and hardware. No regular return of income under the provisions of section 139(1) of the Income Tax Act, 1961 (the Act) was filed for AY 2017-18. Based on the information that the appellant made cash deposits of Rs.12,66,000/- in specified bank notes (SBN) during demonetisation period in Federal Bank, Mannancherry Branch, the AO issued a notice u/s. 142(1) of the Act, 2 ITA No. 235/Coch/2025 Ashraf calling upon the appellant to file the return of income. The appellant did not comply with the notice u/s. 142(1) of the Act. However, the appellant had filed certain information called for in response to notice u/s. 142(1) of the Act. Based on the information filed by the appellant, the AO formed an opinion that the appellant had shown lower profit. Accordingly he estimated the profit at Rs. 5,92,823/-. The AO also made addition of cash deposit in SBN during demonetisation period as unexplained money of the appellant vide order dated 05.12.2019 passed u/s. 144 of the Act. 3. Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order confirmed the action of the AO. 4. Being aggrieved, the appellant is in appeal before us in the present appeal. 5. The learned counsel for the assessee submits that the AO ought not have made addition under the head ‘business’ by estimating the profit at Rs. 5,92,823/- by comparing the profit for the year with subsequent year. It is further submitted that the AO made the addition under the head ‘business’, the cash deposit made during the demonetisation period should have been treated as explained by telescoping such addition into cash deposits. 6. On the other hand, the learned Sr. DR submits that the order of the CIT(A) is reasoned one and no interference is called for. 7. I heard the rival contentions and perused the material available on record. Admittedly, the appellant is dealing in the business of paints and 3 ITA No. 235/Coch/2025 Ashraf hardware. No regular return was filed by the appellant. Therefore, in the circumstances the AO was justified in estimating business profit u/s. 44AD of the Act. Thus, the addition made under the head ‘business’ of Rs. 5,92,823/- is hereby confirmed. However, having estimated the income u/s. 44AD, no addition is required to be made under the head ‘income from other sources’. Therefore, I direct the AO to delete the addition of Rs. 3,93,000/- made on account of cash deposits. 8. In the result, the appeal filed by the assessee stands partly allowed. Order pronounced in the open court on 30th April, 2025. Sd/- (INTURI RAMA RAO) ACCOUNTANT MEMBER Cochin, Dated: 30th April, 2025 n.p. Copy to: 1. The Appellant 2. The Respondent 3. The Pr. CIT concerned 4. The Sr. DR, ITAT, Cochin 5. Guard File By Order Assistant Registrar ITAT, Cochin "