SHANMUGAM PONNAN,CHENNAI V. ITO, NCW-9(4), CHENNAI

ITA 2520/CHNY/2024

AI Insights

The case involves Shanmugam Ponnan, who acted as a distributor for M/s Hatsun Agro Product Ltd, selling milk products. The ITO assessed his income for FY 2016-17 on a best judgment basis under section 144 of the Income Tax Act, 1961, estimating his income at 8% of the business receipts amounting to Rs.2,06,68,501. Additionally, a separate addition of Rs.11,37,100 was made for cash deposits during demonetization. The CIT(A) upheld these assessments, leading to the appeal before the Income Tax Appellate Tribunal, Chennai. The Tribunal found the initial profit rate estimation excessive and directed a re-assessment at a lower profit rate of 4% on all deposits.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 472413 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R.KAVITHA
• Assessee Lawyers: R. VIJAYARAGHAVAN
• Keywords: Business income; Bogus
• Section: 144; 131

Judgement Text

" आयकर अपीलीय अिधकरण ‘बी’’ Ɋायपीठ चेɄई मŐ। IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI माननीय ŵी मनोज क ुमार अŤवाल ,लेखा सद˟ एवं माननीय ŵी मनु क ुमार िगįर, Ɋाियक सद˟ क े समƗ। BEFORE HON’BLE SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER AND HON’BLE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER आयकरअपील सं./ ITA No.2520/Chny/2024 (िनधाŊरणवषŊ / Assessment Year: 2017-2018) Shanmugam Ponnan 39/41, Arunachalam Archari Street, Chepauk, Chennai 600 005. [PAN: DAZPS 7397G] Vs. The Income Tax Officer, Non Corporate Ward 9(4) Chennai 600 034 (अपीलाथȸ/Appellant) (Ĥ×यथȸ/Respondent) अपीलाथȸ कȧ ओर से/ Appellant by : Shri. R. Vijayaraghavan, Advocate Ĥ×यथȸ कȧ ओर से /Respondent by : Ms. R. Kavitha, Addl. CIT. सुनवाई कȧ तारȣख/Date of Hearing : 18.12.2024 घोषणा कȧ तारȣख /Date of Pronouncement : 31.01.2025 आदेश / O R D E R PER MANU KUMAR GIRI (Judicial Member) This appeal by the assessee is arising out of the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi in order No. ITBA/NFAC/S/250/2023-24/1063468117(1) dated 27.03.2024. The assessment was framed by the Income Tax Officer, Non Corporate Ward 9(4), Chennai for the assessment year 2017-18 on best judgment basis u/s. 144 of the Income Tax Act, 1961 (hereinafter the ‘Act’), vide order dated 10.10.2019. 2 ITA No.2520/Chny/2024 2. The registry has noted delay of 124 days in filing the appeal. The ld. AR has submitted that the Accountant of the assessee met with an accident in the month of March, 2024 and was advised strict bed rest for months together, hence, he failed to notice the order in time. The assessee has also filed affidavit stating the above reason. Considering the same, we condone the delay and admit the appeal for adjudication. 3. It could be seen that assessee failed to respond during assessment proceedings. Pursuant to the summon u/s 131 dated 17.09.2019, the assessee appeared before the assessing officer and stated that he acted as a small distributor for M/s Hatsun Agro Product Ltd. and engaged in selling milk products to departmental stores, hotels, Tea shops and also some retail selling across the counter. He also submitted copy of Distributor Agreement with M/s Hatsun Agro Product Ltd, copy of Indian Bank Account statement for the FY 2016-17, Ledger copy of his transaction in books of M/s Hatsun Agro Product Ltd and copy of GST Registration. The Ld. AO treated the bank credit to the tune of Rs.2,06,68,501/- as business receipts of the assessee from milk distributorship business out of the total credits of Rs.2,18,05,601/- in assessee’s bank accounts during FY 2016-17. The ld. AO held that since the assessee had not furnished the required details of his income from the above said business, the income of the assessee for the F.Y. 2016-17 relevant to AY 2017-18 was estimated @8% of Rs.2,06,68,501/- which came to Rs.16,53,480/-. The Ld. AO mad separate addition of Rs.11,37,100/- which was 3 ITA No.2520/Chny/2024 nothing but cash deposited by the assessee in Specified Bank Notes in the same bank account during demonetisation. The Ld. CIT(A) confirmed the same against which the assessee is in further appeal before us. 4. The ld. Counsel submitted that the assessee acted as distributor of M/s Hatsun Agro Product Ltd and all the cash deposits were made out of sales proceeds from the sale of milk and in the said process, assessee received commission of Rs.1,26,400/- only on turnover of Rs.2,06,68,501/- which translate into commission of 0.6% only. The Ld. AR pleaded for lower estimation on entire deposits during the year. The Ld. Sr. DR opposed any interference in the orders of lower authorities. 5. It is quite clear that the assessee acted as agent for distribution of milk products which is low margin commodity. To support the nature of receipts, the assessee had filed the copy of Distributor Agreement with M/s Hatsun Agro Product Ltd, copy of Indian Bank Account statement for the FY 2016-17, Ledger copy of assessee’s transaction in books of M/s Hatsun Agro Product Ltd and copy of GST Registration which establish that the business receipts were genuine and not bogus. Firstly, the artificial distinction between deposits made during demonetization period and deposits made during other period could not be held to be justified since the character of receipts would be similar i.e. business receipts on sale of milk products. The assessee is not shown to have any other source of income. Secondly, the 8% profit rate as estimated by Ld. AO is on the higher side considering the nature of commodity being dealt with by the assessee. Therefore, with a view to put an end 4 ITA No.2520/Chny/2024 to litigation, we direct Ld. AO to estimate business income of 4% on entire deposits including deposits made during demonetization period. The Ld. AO is directed to re- compute the income of the assessee. No other ground has been urged in the appeal. 6. In the result, appeal filed by the assessee is partly allowed. Order pronounced in the open court on 31st day of January, 2025 Sd/- Sd/- (मनोज क ुमार अŤवाल) (मनु क ुमार िगįर) (MANOJ KUMAR AGGARWAL) लेखा सद˟ / ACCOUNTANT MEMBER (MANU KUMAR GIRI) Ɋाियक सद˟ / JUDICIAL MEMBER चेɄई Chennai: िदनांक Dated : 31-01-2025 KV आदेश कȧ ĤǓतͧलͪप अĒेͪषत /Copy to : 1. अपीलाथŎ/Appellant 2. ŮȑथŎ/Respondent 3. आयकरआयुƅ/CIT, Chennai/Coimbatore/Madurai/Salem. 4. िवभागीयŮितिनिध/DR 5. गाडŊफाईल/GF "