Abhiram Enterprises Vs DCIT (ITAT Bangalore)
Mere Difference Between Bank Deposits & GST Turnover Cannot Be Added Entirely U/s 69A; Arbitrary Profit Estimation Without Comparable Data Unsustainable: Bangalore ITAT
The assessee-firm, engaged in trading old newspapers and magazines, did not file its return or participate in the reassessment proceedings. Based on the bank statement and GST data, the AO estimated profit at 10% of GST turnover of ₹11.43 crore and made a further addition of ₹8.51 crore under section 69A, representing the difference between total bank deposits of ₹19.94 crore and GST sales. The CIT(A) dismissed the appeal without examining the merits due to a delay of 402 days.
The Bangalore ITAT condoned the delay, considering the closure of business, serious financial difficulties, limited education of the partners and lack of access to digital facilities. It admitted additional evidence comprising VAT and GST returns, details of three bank accounts, transaction summaries and the profit and loss account.
The Tribunal held that aggregate bank deposits could not be compared merely with GST turnover because GST was introduced only from 1 July 2017 and covered nine months of the financial year. The assessee claimed total turnover of approximately ₹15.81 crore after including VAT sales. Further, bank deposits included sales receipts, inter-bank transfers, capital introductions, loans, reversals and other business transactions. The entire difference could not be treated as unexplained money without examining each material credit.
It also held that the AO’s estimation of profit at 10% for one year and 12.5% for another, without considering the nature of the business, past results or comparable cases, was arbitrary and inconsistent. The matter was restored to the AO to reconcile all bank accounts, exclude contra entries and explained transactions, prevent double taxation of sales receipts and restrict any section 69A addition only to specifically unexplained credits. Any profit estimation must be based on relevant material and a reasonable rate.
For AY 2019-20, the Tribunal further observed that a ₹27.31 lakh entry in Form 26AS reflecting TCS under section 206C(1F) prima facie indicated the purchase of a motor vehicle and not its sale. The AO was directed to delete the alleged short-term capital-gains addition if the purchase was established. The connected penalty proceedings were also set aside pending fresh assessment.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
These four appeals are filed by the assessee against the order of the Ld. CIT(A) passed u/s 250 of the Act. For the sake of convenience, all the appeals were heard together and are being disposed off by this common order.
