Gunaseelan Janaki Radha Vs ITO (ITAT Chennai)
Introduction: The Income Tax Appellate Tribunal (ITAT) Chennai, in the case of Gunaseelan Janaki Radha Vs Income Tax Officer (ITO), has ruled that credit entries appearing in current and savings accounts should be treated as gross receipts from business transactions, with an 8% profit rate being applicable. This verdict was reached after the assessee failed to provide any evidence that the profit rate should be lower than the stipulated 8%.
Analysis: The case began when Gunaseelan Janaki Radha, a textile business owner, was found to have made cash deposits of Rs. 23 lakhs in a savings account during the financial year 2011-12 without filing a return of income for the assessment year 2012-13. This triggered the reopening of the case under section 147 of the Act.
The Assessee had two accounts in City Union Bank, Erode, one current account and one savings account. The Assessing Officer (AO) noted that the total credit entries in these accounts amounted to Rs. 2,35,22,880. As the assessee couldn’t provide an explanation for the cash deposits, the AO deemed them as gross receipts from her business and applied an 8% profit rate.
Gunaseelan appealed to the Commissioner of Income Tax (Appeals), however, the appeal was dismissed due to the absence of any documentary evidence challenging the 8% profit rate or the treatment of the credit entries as gross receipts from her business.
Conclusion: The ITAT Chennai ruling in the case of Gunaseelan Janaki Radha Vs ITO reinforces the importance of maintaining proper financial records and the obligation to declare any significant credit entries in business accounts. The judgement emphasizes that absent of suitable documentary evidence or explanations, such credit entries will be deemed as gross receipts from business transactions, with a profit rate of 8% applied. This significant ruling provides further clarity on the interpretation of business income in the context of tax law.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This appeal by the assessee is arising out of the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi in Appeal No.CIT(A), Coimbatore-3/10411/2019-20 dated 22.06.2021. The assessment was framed by the Income Tax Officer, Ward 1(2), Erode for the assessment year 2012-13 u/s.144 r.w.s.147 of the Income Tax Act, 1961 (hereinafter the ‘Act’), vide order dated 11.12.2019.
2. At the outset, it is noticed that this appeal by assessee is barred by limitation by 86 days. The assessee received the impugned appellate order on 22.06.2021 and appeal was to be filed on or before 21.08.2021 but actually it was filed on 15.11.2021 thereby there was a delay of 86 days. The assessee has filed affidavit for condonation of delay stating that this delay is due to pandemic period of Covid 19 and subsequent events and the Hon’ble Supreme Court in Miscellaneous Application No.665 of 2021 vide order dated 23.03.2020 has given directions that the delay are to be condoned during this period 15.03.2020 to 14.03.2021 and they have condoned the delay up to 28.02.2022 in Miscellaneous Application No.21 of 2022 vide order dated 10.01.2022. Since the Hon’ble Supreme Court has condoned the delay during the said period, respectfully following the same we condone the delay and admit the appeal.
3. The first issue in this appeal of assessee is as regards to violation of principles of natural justice as well as assumption of jurisdiction u/s.147 of the Act by reopening the assessment. For this, assessee has raised ground nos.1 to 6.
4. When a query was put to ld.counsel, he nodded his head in no and he has not argued anything on the principles of natural justice or on reopening of assessment u/s.147 of the Act. Accordingly, this ground of assessee’s appeal is dismissed as not pressed.
5. The second issue on merits is as regards to the order of CIT(A) confirming the action of the AO in assessing / computing business income at 8% of credit entries. For this, assessee has raised ground Nos.7 & 8, which need not be reproduced.
6. Brief facts are that as per information in the possession of Department, the assessee has made cash deposit to the tune of Rs.23 lakhs in savings bank account during the financial year 201112 relevant to this assessment year 2012-13. The assessee has not filed any return of income for assessment year 2012-13 and hence, proceedings for reopening u/s.147 of the Act was initiated and accordingly notice u/s.148 of the Act was issued. The assessee is engaged in the business of textiles in the name of ‘Janakiradha Tex’ and most of transactions relates to her textile business. This finding maintained two accounts in City Union Bank, Erode i.e., one current account and one savings account. The AO noticed from the bank statement obtained that the total credit entries appearing in current account and savings account are Rs.2,09,91,982/- and Rs.30,30,898/- respectively. According to AO, the total credit appearing in the bank accounts comes to Rs.2,35,22,880/- and assessee failed to offer any explanation for the cash deposits made and accordingly, the same is treated as gross receipts from her business. The AO estimated the profit rate at 8% on the gross receipt of Rs.2,35,22,880/- being business transactions on account of credit appearing in current account and savings bank account. He assessed the income accordingly. Aggrieved, assessee preferred appeal before CIT(A).
7. We have heard rival contentions and gone through facts and circumstances of the case. Before us, the assessee could not submit any documentary evidence that the profit rate is lower than 8% as computed by the AO. The assessee has not maintained any books of accounts nor any bills and vouchers. Since the assessee could not substantiate that the profit rate applied by AO at 8% is higher and actually in this trade profit rate is lower, we have no alternative except to confirm the order of AO and that of the CIT(A). The appeal of the assessee is dismissed.
8. In the result, the appeal filed by the assessee is dismissed.
Order pronounced in the open court on 17th May, 2023 at Chennai.2012-13
