Rashid Ahmad Wani Vs ITO (ITAT Amritsar)
Summary: The assessee, engaged in wholesale and retail trading of medicine and pharmaceutical goods in a remote area of the Kashmir valley, had deposited Rs. 17.99 lakhs in cash comprising Specified Bank Notes during the demonetisation period. Total credits in the assessee’s J&K Bank account during the financial year were Rs. 1.78 crores. In the absence of compliance with notices issued under section 142(1) of the Income-tax Act, 1961, the Assessing Officer completed the assessment ex parte under section 144, determining total income at Rs. 30.80 lakhs, including an addition of Rs. 17.99 lakhs under section 69A and business profits of Rs. 12.80 lakhs.
In first appeal, the CIT(A), NFAC, Delhi deleted the Rs. 17.99 lakh addition relating to SBN deposits, holding that the assessee’s medicine and pharmaceutical goods business was covered by Gazette Notification No. SO 3416(E) dated 09/11/2016. However, the CIT(A) upheld estimation of business profits at 8% on turnover of Rs. 1.78 crores.
Before the ITAT, the assessee submitted that proper books could not be produced as they were misplaced and not readily available due to the curfew, strike and continuous shutdown in the Kashmir valley during the relevant period. It was also submitted that the margin from wholesale and retail pharmaceutical trading was generally 2.5% and that a fair lower rate should be adopted.
The ITAT considered the rival contentions and held that, considering the nature of the assessee’s wholesale and retail medicine and pharmacy business in a remote area of Kashmir valley, the net profit after expenses should be estimated at 4% of gross sales of Rs. 1.78 crores. The AO was directed accordingly. The assessee was to be charged to tax at normal rates and was entitled to consequential relief. The appeal was partly allowed.
Background of the Assessment
The appeal was filed by the assessee against the order of the ld. CIT(A), NFAC, Delhi, passed under section 250 of the Income-tax Act, 1961, dated 20.06.2025. The appellate order emanated from the order of the AO, Srinagar, passed under section 144 of the Act, dated 23.12.2019.
The assessee was engaged in trading of medicine and pharmaceutical goods on both wholesale and retail basis in a remote area of the Kashmir valley. During the demonetisation period, the assessee deposited Rs. 17.99 lakhs in cash comprising SBNs. The total credit in the assessee’s J&K Bank account during the entire financial year was Rs. 1.78 crores.
As the assessee had not filed a regular return, proceedings were initiated through notice under section 142(1) dated 02/05/2019. In the absence of compliance with notices issued by the Department, the assessment was completed ex parte on the basis of information obtained from the bank under section 133(6).
Additions Made in the Ex Parte Assessment
The Assessing Officer determined the total income at Rs. 30.80 lakhs. This included an addition of Rs. 17.99 lakhs under section 69A in respect of the SBN deposit and business profits of Rs. 12.80 lakhs determined on the remaining bank deposits.
The assessee challenged the assessment before the CIT(A), NFAC, Delhi. The CIT(A) deleted the addition relating to the SBN deposit of Rs. 17.99 lakhs during the demonetisation period, relying on Gazette Notification No. SO 3416(E) dated 09/11/2016 and the fact that the assessee was engaged in trading of medicine and pharmaceutical goods.
However, the CIT(A) upheld the estimation of business profits at 8% on the total turnover of Rs. 1.78 crores. The assessee therefore remained in appeal before the Tribunal only in respect of the estimation of business profits.
Assessee’s Submissions Before the Tribunal
The assessee submitted that proper books could not be produced as they had been misplaced and were not readily available. According to the submission, the circumstances were connected with the curfew and strike prevailing in the Kashmir valley post abrogation of Article 370 and the continuous shutdown during the period when the assessment was framed in 2019.
It was further submitted that the margin of profit from wholesale and retail trading of pharmaceutical goods was generally 2.5%. On this basis, the assessee prayed that the estimated percentage be reduced and that a fair rate be adopted.
Revenue’s Submission
The Ld. DR relied upon the order of the Ld. CIT(A).
ITAT’s Findings and Reasoning
The Tribunal considered the rival contentions and the material placed before it. It focused on the nature of the assessee’s business, namely wholesale and retail trading in medicine and pharmacy goods in a remote area of the Kashmir valley.
Considering these circumstances, the Tribunal was of the opinion that the interest of justice would be served by estimating the net profit from the medicine business, after all expenses, at a fair rate of 4% of the gross sales.
The gross sales considered by the Tribunal were Rs. 1.78 crores. Thus, the Tribunal did not sustain the 8% rate applied by the CIT(A) and directed the Assessing Officer to estimate the net profit at 4% of the gross sales.
Direction on Taxation and Consequential Relief
The Tribunal directed the AO accordingly. It further held that the assessee would be charged to tax at normal rates and would be entitled to consequential relief.
Final Decision
The ITAT Amritsar partly allowed the assessee’s appeal. The net profit from the medicine business was directed to be estimated at 4% of gross sales of Rs. 1.78 crores, after all expenses, instead of the 8% rate upheld by the CIT(A).
The order was pronounced on 24.07.2026 in the Open Court.
FULL TEXT OF THE ORDER OF ITAT AMRITSAR
This appeal is filed by the assessee against the order of ld. CIT(A), NFAC, Delhi, passed u/s 250 of the IT Act, 1961, dated 20.06.2025, which has emanated from the order of the AO, Srinagar, passed u/s 144 of the Act, dated 23.12.2019.
2. Grounds of appeal taken in Form No. 36 are as follows:
“1. That the Appeal is within Specified Time.
2. That on the facts & Circumstances of the Case, the Ld. CIT(A) upheld the Order of Assessing Officer in an arbitrary manner which was passed by A. 0 without application of mind and without giving real opportunity of being heard.
3. The Ld. CIT(A) upheld the addition of Rs.12,80,940.00 by applying Net Profit rare of 8% on total bank deposits made in SOD Account No.0404030100000010 J&K Bank Ltd, Old Secretariat Srinagar without any basis and reasonable ground.
4. That the assessment is bases on mere assumptions & Conjectures.
5. That the assessee craves leave to add or to amend or to delete any other ground of Appeal before or at the time of hearing of Appeal.”
3. The brief facts of the case is that the assessee is engaged in trading of medicine and pharmaceutical goods ( both wholesale and retail) in remote area of Kashmir valley, and has deposited an amount of Rs. 17.99 lakhs in cash ( SBN ) during demonetisation period and the total credit in his bank ( J & K Bank ), during the entire financial year was RS. 1.78 crores and in absence of any regular being filed by the assessee , proceedings were initiated vide notice u/s 142(1) dated 02/05/2019.
4. In absence of any compliance to notices issued by the department, assessment was completed exparte, on the basis of information obtained from the bank uls 133(6) on a total income of Rs 30.80 lakhs ( including an addition of Rs.17.99 lakhs u/s 69A being the deposit of SBN plus business profits determined at Rs.12.80 lakhs on the remaining deposits in bank).
5. Matter carried in first appeal , has been allowed in part by the Ld CIT ( A ) by deleting the addition of SBN amounting to Rs. 17.99 lakhs , during demo period , being covered by the gazette notification No SO 3416(E) dated 09/11/2016, the assessee being in the business of trading of medicine and phaiiiia goods.
6. Now the assessee is in appeal only on the ground of estimation of business profits @ 8% as determined by the Ld CIT ( A ) on the total turnover of Rs.1.78 crores for the year under appeal .
7. The assessee in course of hearing filed submissions that proper books could not be produced and are misplaced and not readily available in view of the curfew and strike prevailing in the Kashmir valley post abrogation of Article 370 , and because of continuous shut down during the period when assessment was being framed in the year 2019 . It was further submitted that the margin of profit from wholesale and retail trading of pharmaceutical goods are generally 2.5% ( two point five percentage) , and he prayed for reduction of the estimated percentage, and for adoption of a FAIR rate.
8. The Ld DR relied on the order of the Ld CIT (A) .
9. We have considered the rival contention , and the materials placed before us and we are of the opinion that considering the fact that the assessee is carrying on wholesale and retail trading business in medicine and pharmacy goods in a remote area of Kashmir valley , interest of justice would be served if the net profit from medicine business ( after all .expenses) is estimated at a fair rate of 4% (four percentage) of gross Sales of Rs. 1.78 crores, and the AO is directed accordingly and the assessee will be charged to tax at normal rates and is entitled to consequential relief.
10. The appeal of the assessee is partly allowed.
Order pronounced on 24.07.2026 in the Open Court.
