ITO Vs Sanchit Dua (ITAT Delhi)
ITAT Delhi Upholds CIT(A)’s Estimation of 2% Net Profit on Cash Deposits – Rejects Revenue’s Appeal in Vegetable Vendor Case
Assessee, a vegetable vendor, was found to have deposited Rs.2.56 crore in his current account along with salary income of Rs.1.23 lakh. According to Assessee, the business of vegetable export to Pakistan collapsed after policy changes in December 2016, resulting in losses & he later took up a job as a data entry operator. Assessee explained that cash payments were made to farmers & sales were largely in cash, with deposits reflecting wholesale vegetable trade. However, AO rejected explanation for want of supporting evidence & treated entire deposits as unexplained money u/s 69A, taxing them u/s 115BBE.
Before CIT(A), Assessee submitted bank account details, daily sales records & documents showing cash deposits from different cities in different states, mostly in small denominations. CIT(A) observed that the account was a commercial current account with regular deposits & withdrawals, indicating genuine business operations. CIT(A) further noted that peak credit method was inapplicable as deposits came from different locations. While rejecting Assessee’s claim of negligible net profit ratio of 0.17% as too low, CIT(A) applied a reasonable profit rate of 2% on total deposits, thereby sustaining addition of Rs.5.13 lakh & granting relief of over Rs.2.52 crore.
