Dineshkumar Nemichand Jain Vs ITO (ITAT Ahmedabad)
Pick & Choose Approach of CIT(A) Rejected – Demonetisation Deposits Cannot Be Singled Out – Treated as Business Income Not u/s 69A -ITAT Ahmedabad
AO had made two additions: ₹26,57,500 – cash deposits during demonetisation, treated as unexplained u/s 69A & ₹11,11,800 – net profit estimated @ 8% of turnover.
CIT(A) partly allowed appeal, sustaining ₹26.57 lakh addition as unexplained, while estimating NP @ 6% on other business income
Assessee’s Arguments
- Cash deposits during demonetisation were from regular business sales; identical deposits before & after demonetisation were accepted as business receipts taxable u/s 44AD.
- CIT(A) adopted a “pick & choose” approach by treating only demonetisation deposits as unexplained.
- Alternatively, even if deposits are taxed, they should be assessed as business income @ 8% u/s 44AD, not at maximum marginal rate u/s 115BBE.
- NP estimation of 6% was arbitrary; past year NP was around 2.46%
Tribunal’s Findings
- Noted that assessee carried on consistent business activities, with similar pattern of deposits throughout the year.
- CIT(A) erred in taxing demonetisation deposits differently from other cash deposits.
- Once sales & purchases were accepted, cash deposits could not be wholly treated as unexplained.
- However, profits must be estimated reasonably based on past records.
- Tribunal directed NP to be estimated at 4% of turnover, instead of 6%, subject to verification of figures in CIT(A)’s order.
- Addition u/s 69A was not sustainable; deposits to be treated as business income
Outcome
- Addition of ₹26.57 lakh u/s 69A deleted.
- Deposits & other income to be taxed as business receipts, with NP estimated @ 4%.
- Appeal allowed for statistical purposes
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
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