ITO Vs Rakesh Hukumchand Agarwal (ITAT Pune)
Section 68 can’t apply when business link proven – Tribunal sustains profit estimation
The case concerned a grain merchant. Based on information that he deposited ₹2.61 crore in cash with a Cooperative Society without filing return, proceedings were reopened u/s 147. In response to notice u/s 148, he filed return declaring income of just ₹1,98,820/-. AO rejected the explanation, treating the entire cash deposits of ₹2,61,10,199/- as unexplained cash credits u/s 68 & assessed total income at ₹2.63 crore.
On appeal, CIT(A) accepted that assessee was engaged in regular grain trading business & the deposits represented business turnover. Holding that taxing the full deposits u/s 68 was incorrect, CIT(A) deleted the addition & instead estimated income at 8% of deposits (₹2.61 crore), considering that the normal profit margin in grain trade exceeds 8%.
Revenue challenged this before ITAT, arguing that (i) Assessee had declared receipts of only ₹2.31 crore, less than actual deposits, hence excess ₹29.26 lakh should be added u/s 68 & (ii) Since total receipts exceeded ₹1 crore, failure to audit accounts violated section 44AB.
Tribunal, however, upheld CIT(A)’s order, noting that deposits were clearly linked to assessee’s grain business & estimation of income at 8% was reasonable. Accordingly, Revenue’s appeal was dismissed & the partial relief granted by CIT(A) was sustained.
