Sachin Ganpat Vadane Vs ITO (ITAT Pune)
Entire Cash Purchases Cannot Be Added Under Section 69C; Only Profit Element Taxable: ITAT Pune
The Pune Bench (SMC) of the Income Tax Appellate Tribunal (ITAT) partly allowed the assessee’s appeal for AY 2019-20, holding that entire cash purchases cannot be treated as unexplained expenditure under section 69C when the assessee is engaged in a small retail business and sales are accepted.
The assessee, a small retail trader in cattle feed, had made cash purchases of ₹12.07 lakh from a supplier. Due to non-compliance at the assessment stage, the Assessing Officer framed a best judgment assessment and added the entire purchase amount under section 69C as unexplained expenditure. The CIT(A) confirmed the addition.
Before the Tribunal, the assessee explained—supported by an affidavit—that he operated a small village-level retail business, selling cattle feed in small quantities with minimal margins, and that the purchases were made for resale. The ITAT accepted that business activity was established and that only the profit embedded in such transactions can be brought to tax, not the gross purchases.
In the absence of precise turnover details, the Tribunal estimated annual turnover at ₹20 lakh and applied presumptive taxation under section 44AD, adopting net profit @8%, thereby estimating taxable income at ₹1.60 lakh. The balance addition was deleted.
Accordingly, the ITAT restricted the addition to ₹1.60 lakh, deleted the balance, and partly allowed the appeal
FULL TEXT OF THE ORDER OF ITAT PUNE
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