Case Law Details
Brief of the Case
ITAT Delhi held in the case of Mohd Tehseen vs. ITO that the rate of profit @15% on estimated unaccounted sale is an arbitrary rate without any comparable cases. The best comparison is also available of the business of the assessee himself wherein he has shown net profit at the rate of 6%. This 6% rate has not been disturbed by AO. This rate is also higher against the rates provided by provisions of section 44AF, which is 5%. Also departmental representative could not show any reason that why profit should be estimated at the rate of 15% instead of 6%. Therefore, we are of the view that in absence of any comparable cases for adoption at such a high rate, which is almost 2.5 times of the net profit rate of the assessee, is not justified. As assessee has disclosed 6% net profit which is accepted by assessing officer, we do not see any reason to adopt any other rate.
Facts of the Case
The assessee is an individual earning income from trading of clothes. He filed his return of income on 04/12/2009 showing income of Rs.15,99,72. It was found that assessee has deposited Rs. 92,93,900/-in his 3 bank accounts. Assessee was asked to explain the reasons and source of this deposit as assessee has disclosed sales of Rs.30,66,200/- only and against this cash deposit in the bank account is Rs.92,93,900/-. Assessee explained before assessing officer that assessee was required to show turnover to the banker because a cash credit limit of Rs.15 Lacs was sanctioned and, therefore, to justify the bank limit the turnover was shown. Assessee also stated that on the same day he has deposits and withdrawals in this bank account and therefore credit of that transaction of withdrawal should be given to the assessee.
The assessing officer noted that assessee has filed his return of income showing net profit at the rate of 6% of the turnover and assessee himself had admitted that he has filed his return of income as per provisions of section 44AF. The Assessee further stated before the assessing officer that he is maintaining proper books of accounts. Therefore, as the amount deposited in cash in about 3 bank accounts was not reflected in the books of the assessee, he rejected the books of accounts of the assessee. The difference of Rs. 62,27,700/– is treated as unexplained sales of the assessee and on which AO applied a net profit rate of 15% and made an addition of Rs.9,34,155/-.
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