Vijay Shridhar Wadkar Vs ITO (ITAT Pune)
ITAT Pune: Cash Deposits of Vodafone Distributor Taxable on Estimated Basis @8% – CIT(A)’s Direction Upheld; Assessee’s Appeal Dismissed
The Pune Bench “B” of the ITAT dismissed the assessee’s appeal in Vijay Shridhar Wadkar v. ITO for AY 2017-18, upholding the order of the CIT(A)/NFAC which had directed estimation of income at 8% of cash deposits in the bank account.
The assessee, a distributor of Vodafone Idea Ltd., had deposited ₹51.80 lakh in cash in his current bank account during the year. Since there was no compliance before the AO despite repeated notices, the assessment was completed ex parte under section 144, treating the entire cash deposit as unexplained under section 68.
Before the CIT(A), the assessee contended that the cash deposits represented collections from customers on behalf of Vodafone Idea Ltd. and that his real income was only commission. The CIT(A) admitted additional evidence (bank statements and distributorship agreement) and observed that cash deposits were made at frequent intervals and were largely utilised for remittances to Vodafone Idea Ltd. Holding that the receipts were in the nature of business receipts, the CIT(A) set aside the addition under section 68 and directed the AO to estimate income at 8% of such receipts, failing which the original addition would stand.
The Tribunal found no infirmity in this approach. It noted that the assessee had failed to cooperate during assessment proceedings and that the CIT(A)’s direction to estimate income at 8% was a reasonable and pragmatic solution in the absence of proper details. The Tribunal rejected the assessee’s argument that section 44AD was inapplicable, observing that the estimation was made as a matter of best judgment and not by mechanically invoking section 44AD.
Accordingly, the ITAT upheld the CIT(A)’s order and dismissed the assessee’s appeal. The decision reiterates that where cash deposits are found to be business receipts but exact income cannot be determined due to non-compliance, estimation of profit at a reasonable rate is justified.
FULL TEXT OF THE ORDER OF ITAT PUNE
This appeal filed by the assessee is directed against the order dated 28.03.2024 of the Ld. CIT(A) / NFAC, Delhi relating to assessment year 2017-18.
