Sakthi Traders Vs ITO (ITAT Chennai)
The assessee, a partnership firm engaged in the business of running a hardware store, filed its return of income for Assessment Year 2017-18 declaring total income of Rs.97,940. After scrutiny proceedings under Sections 143(2) and 142(1), the Assessing Officer (AO) noted cash deposits of Rs.27,07,500 in the assessee’s bank account, including Rs.22,51,000 deposited in specified bank notes during the demonetisation period. As the assessee did not furnish documentary evidence explaining the deposits or comply with the notices, the AO completed the assessment ex parte under Section 143(3). The AO attributed Rs.9,38,000 to the closing cash balance as on 08.11.2016 and treated the remaining Rs.13,13,000, stated to represent daily cash collections during the demonetisation period, as unexplained money under Section 69A. In addition, owing to non-production of books of account, the AO estimated business income by applying a net profit rate of 2% on the declared turnover of Rs.2,71,44,530, resulting in estimated business income of Rs.5,42,890.
The Commissioner of Income Tax (Appeals) sustained the addition of Rs.13,13,000 under Section 69A. For estimating business income, however, the CIT(A) excluded the same amount from the declared turnover and recomputed the turnover at Rs.2,58,31,530, while maintaining the 2% profit rate, thereby reducing the estimated business income to Rs.5,16,630 and granting relief of Rs.26,260.
