VENKATESHAM AVULA,HYDERABAD V. ITO., WARD-11(1), HYDERABAD

ITA 1168/HYD/2024

AI Insights

The case involves Venkatesham Avula, an individual engaged in trading of livestock and sale of milk, who appealed against the order of the CIT(A) which estimated his income at 12% on cash deposits during the demonetization period. The Assessing Officer had initially estimated the income at 16% on deposits excluding the demonetization period. The Tribunal considered the nature of the assessee's business and the provisions of Section 44AD, which allows for a lower rate of profit estimation for small businesses not maintaining books of accounts, and decided on an 8% estimation.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 36101 (ITAT-HYDERABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SM-B
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: U. MINI CHANDRAN
• Assessee Lawyers: P. MURALI MOHAN RAO
• Keywords: Business income; Income from undisclosed sources
• Section: 44AD; 69A

Judgement Text

"आयकर अपीलȣय अͬधकरण, हैदराबाद पीठ मɅ IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “SMC-B”, HYDERABAD BEFORE SHRI MANJUNATHA. G, ACCOUNTANT MEMBER & SHRI K.NARASIMHA CHARY, JUDICIAL MEMBER आ.अपी.सं / ITA No. 1168/Hyd/2024 (Ǔनधा[रण वष[ / Assessment Year: 2017-18) Venkatesham Avula, Hyderabad. [PAN : ARPPA7530D] Vs. Income Tax Officer, Ward-11(1), Hyderabad. अपीलाथȸ / Appellant Ĥ× यथȸ / Respondent Ǔनधा[ǐरती ɮवारा/Assessee by: Shri P. Murali Mohan Rao, AR राजè व ɮवारा/Revenue by: Ms U. Mini Chandran Sr. AR सुनवाई कȧ तारȣख/Date of hearing: 18/12/2024 घोषणा कȧ तारȣख/Pronouncement on: 23/01/2025 आदेश / ORDER PER K. NARASIMHA CHARY, J.M: Aggrieved by the order dated 27/09/2024 passed by the learned Addl / Joint Commissioner of Income Tax (Appeals)-8, Mumbai (“Ld. CIT(A)”), in the case of Venkatesham Avula (“the assessee”), assessee preferred this appeal. 2. Briefly stated facts are that the assessee is an individual and filed his return of income for the AY 2017-18 on 23.03.2018 declaring income of Rs. 3,28,710/- from trading of livestock and sale of milk. NoƟcing ITA No. 1168/Hyd/2024 Venkatesham Avula Page 2 of 4 certain cash deposits in bank accounts during the demoneƟzaƟon period learned Assessing Officer picked up the case for scruƟny and vide order dated 26.12.2019 computed the assessee’s income at Rs. 13,49,654/-. 3. When the assessee preferred appeal, learned CIT(A), by way of impugned order esƟmated the income of the assessee at 12% rate of profit on the total cash deposit of Rs. 53,82,500/- deposited during enƟre financial year and directed the deleƟon of the other addiƟons made by the learned Assessing Officer, thereby partly allowed the assessee’s appeal. Challenging the esƟmate of income by the learned CIT(A), assessee preferred this appeal. 4. Learned AR vehemently submiƩed that the esƟmaƟon of income at 12% of the cash deposits is not sustainable. He has taken us through the margin of net profit would be around 4% to 4.5%. According to him, the average percentage of the business of the assessee is approximately 6%. He pleaded that in terms of secƟon 44AD, it would be reasonable to esƟmate the income of the assessee at 6% on the total deposits. 5. Learned DR placed reliance on the orders of the authoriƟes below. 6. We have gone through the record in the light of the submissions made on either side. It could be seen from the Orders of the authoriƟes that the reason for making esƟmaƟon of income is non-maintenance of proper book of accounts to compute the correct income. learned Assessing Officer, therefore, resorted to making esƟmaƟon of taxable income of assessee at 16%, on the porƟon of deposit made during enƟre FY excluding the demoneƟsaƟon period. It could, however, be seen that the enƟre amount deposited during demoneƟzaƟon period was brought as unaccounted income u/s 69A of the Income Tax Act, 1961 (the Act) and taxed u/s 115BBE of the Act. The esƟmaƟon of profit at 16% was made by denying the benefit of the provisions of secƟon 44AD of the Act on the reason of eligibility factors. But the learned CIT(A) directed the learned Assessing Officer to adopt net profit at 12% on the total cash deposits. ITA No. 1168/Hyd/2024 Venkatesham Avula Page 3 of 4 Assessee claims that the enƟre cash deposits are nothing but the business receipts. 7. Learned CIT(A) accepted that the total deposits made in cash in bank account during the FY 2016-17 are the business receipts of the assessee. The turnover of assessee is less than Rs.1 Crore during the FY. All such deposits are less than the threshold limits of secƟon 44AD of the Act and the assessee is not required to maintain the books, under the provisions of secƟons 44AD, where the books of A/c are not maintained and not mandated to be maintained, the income is to be esƟmated at reasonable rate of profit at 8% or 6%. 8. We, therefore, having regard to the business acƟvity of the assessee in dealing with the livestock and milk and while considering the provisions of SecƟon 44AD of the Act, find it just and proper to esƟmate the rate of profit at 8% as against the profit esƟmaƟon at 12% done by the learned CIT(A). We, accordingly, direct the learned Assessing Officer to esƟmate the income at 8% of the cash deposits of Rs. 53,82,500/-. Assessee did not press the other grounds. Grounds of the appeal are according allowed in part. 9. In the result, appeal of the assessee is allowed in part. Order pronounced in the open court on the 23rd January, 2025. Sd/- Sd/- (MANJUNATHA. G) (K. NARASIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad, Dated: 23/01/2025 OKK/sps ITA No. 1168/Hyd/2024 Venkatesham Avula Page 4 of 4 Copy forwarded to: 1. Venkatesham Avula C/o. P. Murali & Co., Chartered Accountants, 6-3- 655/2/3, Somajiguda, Hyderabad, Telangana-500082. 2. Income Tax Officer, Ward-11(1), Hyderabad. 3. Pr. CIT, Hyderabad. 4. DR, ITAT, Hyderabad. 5. GUARD FILE. TRUE COPY ASSISTANT REGISTRAR ITAT, HYDERABAD "