Mohan Bhaguji Nanaware Vs Ward 1(1) (ITAT Mumbai SMC Bench)
AO Cannot Peel an Onion Trader’s Books & Jump Straight to 8% Profit: Complete Records Must Be Examined Before Invoking Section 145(3) – ITAT Mumbai
Summary: The assessee, an individual, was engaged in the wholesale trading of agricultural produce, particularly onions. He purchased onions from small farmers on a day-to-day basis and transported the produce to the Agricultural Produce Market Committee [APMC], where it was sold to different traders.
The assessee did not file his return within the time prescribed u/s 139(1). Subsequently, the assessment was reopened based upon information concerning substantial cash transactions in his bank account, including cash deposits of ₹4,42,25,550 and cash withdrawals of ₹8,82,290.
In response to the notice u/s 148, the assessee filed his return on 08.02.2024 declaring total income of ₹4,99,440 and turnover of ₹4,74,26,200.
During the reassessment proceedings, the assessee furnished his return, tax audit report, audited balance sheet, profit & loss account, bank statements and various ledger accounts. He explained that the cash deposited in the bank represented sale proceeds generated from the onion-trading business and that the deposits had already been accounted for as sales in the books.
The AO, however, noticed that the assessee had not furnished the purchase and sales ledgers. He also found that the opening stock of ₹2,88,850 and closing stock of ₹3,98,400 appearing in the profit & loss account were not reflected in Form 3CD.
