Bablu Kumar Harinarayan Gupta, Nashik V. Income-Tax Officer, Ward 1(2), Nashik

ITA 678/PUN/2021

AI Insights

The case involves two appeals by the assessee, Babalu Kumar Harinarayan Gupta, against the orders of the National Faceless Appeal Centre (NFAC), Delhi, for the assessment years 2010-11 and 2012-13. The primary issue in both appeals was the application of Section 44AD of the Income-tax Act by the AO, which was contested by the assessee. The AO had treated the cash deposits in the assessee's bank account as sales and applied a profit rate of 8%, leading to significant additions to the assessee's income. The ITAT found that Section 44AD was not applicable due to the high turnover of the assessee, and thus, reduced the profit rate to 5%.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 124203 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Next Hearing Date: 04-01-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 15-12-2021
• Other Referred Cases: Cognizance for Extension of Limitation, In re 438 ITR 296 (SC), Cognizance for Extension of Limitation, In re 432 ITR 206 (SC), Cognizance for Extension of Limitation, In re 421 ITR 314
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 44AD

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT आयकर अपील सं. /ITA Nos.678 & 679/PUN/2021 नधा रण वष / Assessment Years : 2010-11 & 2012-13 Babalu kumar Harinarayan Gupta, 01, Bazibazar, Panchavati, Nashik – 422 005 Maharashtra PAN : AMYPG2695P Vs. ITO, Ward -1(2) Nashik Appellant Respondent आदेश / ORDER PER R.S. SYAL, VP: These two appeals by the assessee relate to the assessment years 2010-11 and 2012-13 and are directed against the separate orders dated 01-09-2021 passed by the National Faceless Appeal Centre (NFAC), Delhi u/s.250 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’). Since a common issue is raised in these appeals, I am, therefore, proceeding to dispose them off by this consolidated order for the sake of convenience. 2. There is a delay of 46 days in presenting the appeals before the Tribunal. At the outset, the ld. Counsel submitted that the delay pertains to Covid-19 pandemic period which deserves to be condoned Assessee by Shri Pramod Shingte Revenue by Shri Piyush Kumar Singh Yadav Date of hearing 05-01-2023 Date of pronouncement 05-01-2023 ITA Nos. 678 & 679/PUN/2021 Babalu Kumar Harinarayan Gupta 2 in view of the Supreme Court judgment on the point of limitation. I am satisfied with the reason of the delay. Therefore, the said delay is condoned and the appeals are admitted for disposal on merits by virtue of the judgment of the Hon’ble Supreme Court in Cognizance for Extension of Limitation, In re 438 ITR 296 (SC) read with judgment in Cognizance for Extension of Limitation, In re 432 ITR 206 (SC) dated 08-03-2021 and 421 ITR 314. 3. The facts for the A.Y. 2010-11 are that the assessee furnished the return in response to notice u/s.148 declaring total income at Rs.1,73,260/-. The Assessing Officer (AO) observed that the assessee had deposited cash of Rs.1,48,43,428/- in his bank account. On being called upon to explain the source of such cash, the assessee submitted that he was working for one Sh. Dinanath Gupta on commission basis. He was purchasing fruits on behalf of Sh. Dinanath Gupta and then selling them to traders on different occasions as per the instructions of Sh. Dinanath Gupta. Since the responsibility to collect cash was on him, the assessee stated, that the receipts also consisting of commission were deposited in his own bank account and then payment was made to Sh. Dinanath Gupta after withdrawing cash from the bank. The assessee could not substantiate the explanation so furnished, which led the AO to apply 8% profit rate u/s.44AD on total ITA Nos. 678 & 679/PUN/2021 Babalu Kumar Harinarayan Gupta 3 cash deposits in the bank to the tune of Rs.1,48,43,428/- treating it as his sales. This led to the addition of Rs.10,14,214/-. The ld. CIT(A) echoed the action of the AO, against which the assessee has approached the Tribunal. 4. Similar is the position for the A.Y. 2012-13. The assessee had deposited cash of Rs.1,70,80,285/- in his bank account. Similar explanation was tendered. Rejecting the assessee’s explanation, the AO again applied section 44AD for working out addition @ 8% of cash deposited in the bank treating the same as his sales. This led to making of addition at Rs.11,96,182/-, which came to be affirmed in the first appeal. 5. I have heard the rival submissions and perused the relevant material on record. It is seen that the assessee admittedly could not substantiate the explanation before the AO to the effect that he was working on behalf of Sh. Dinanath Gupta. This shows that the transactions recorded in the bank account pertained to the assessee’s business only. The AO added up the total deposits and treated the same as ‘Sale’, on which profit rate of 8% has been applied by invoking section 44AD of the Act. Insofar as the assessment year 2010-11 is concerned, section 44AD was applicable only where the total turnover was less than Rs.40.00 lakh. As against that, the AO ITA Nos. 678 & 679/PUN/2021 Babalu Kumar Harinarayan Gupta 4 has himself considered the assessee’s turnover at Rs.1.48 crore. This shows that the invocation of section 44AD by the AO was not justified. It is seen that the assessee declared income @2% on the commission amount, whereas the AO applied profit rate of 8% on total amount of sales. For the A.Y. 2012-13, the turnover of the assessee as adopted by the AO is Rs.1.70 crore, which is again more than the amount prescribed u/s.44AD of the Act. This shows that for both the years the provisions of section 44AD were not applicable. Considering the peculiar facts and circumstances of the instant case, I am satisfied that it would be just and fair if the net profit rate of 5% is applied to the amount of turnover adopted by the AO for both the years under consideration. I order accordingly. 6. No other ground was pressed by the ld. AR. 7. In the result, the appeals are partly allowed. Order pronounced in the Open Court on 05 th January, 2023. Sd/- (R.S.SYAL) VICE PRESIDENT प ु णे Pune; दनांक Dated : 05 th January, 2023 Satish ITA Nos. 678 & 679/PUN/2021 Babalu Kumar Harinarayan Gupta 5 आदेश क त ल प अ े षत/Copy of the Order is forwarded to: 1. अपीलाथ / The Appellant; 2. यथ / The Respondent; 3. The CIT(A) concerned 4. 5. The Pr.CIT concerned िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, SMC, Pune / DR, ITAT, Pune 6. गाड फाईल / Guard file आदेशान ु सार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune Date 1. Draft dictated on 05-01-2023 Sr.PS 2. Draft placed before author 05-01-2023 Sr.PS 3. Draft proposed & placed before the second member JM 4. Draft discussed/approved by Second Member. JM 5. Approved Draft comes to the Sr.PS/PS Sr.PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *