Case Law Details
Puligilla Purnachander Vs ITO (ITAT Hyderabad)
Introduction: In a recent decision by the Income Tax Appellate Tribunal (ITAT) Hyderabad, the case of Puligilla Purnachander vs ITO for the assessment year 2017-18 was addressed. The ITAT held that when profit is estimated, the cash deposit during demonetization cannot be brought to tax separately.
Background: The Assessing Officer (AO) had issued notices to the assessee based on a deposit of Rs. 18,88,000 during the demonetization period. The AO estimated the income at 8% of the gross sales and additionally treated the cash deposit, including demonetized currency, as ‘unexplained’ under section 69A of the Income Tax Act.
ITAT Decision: The ITAT found that the assessee, conducting business as Balaji Fertilizers, Bachannapet, had not filed a return of income for the assessment year 2017-18. The AO estimated the income due to the absence of audited statements. The ITAT, considering the smallness of the amount involved, opted for a pragmatic view, directing the AO to adopt a net profit of 6% of gross sales.
Regarding the addition of Rs. 6,97,000, the ITAT observed that the cash deposit, including demonetized currency, was part of the gross sales. Since the net profit was estimated, the ITAT ruled that the specific deposit in specified notes could not be taxed separately. The AO was instructed to delete this amount.
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