Tax assessments must rely on verifiable evidence; speculative assessments and arbitrary profit rates are impermissible.

Per: Anikesh Banerjee, JM:

The instant appeal of the assessee was filed against the order of NFAC Delhi, [(in brevity ‘the CIT(A)’] order passed u/s 250 of the Income-tax Act, 1961 (in brevity the Act) for assessment year 2017-18, date of order 21/11/2023. The impugned order was emanated from the order of the ld. Income Tax Officer, Baramulla, (in brevity the AO) order passed u/s 144 of the Act, date of order 22/12/2019.

2. The assessee has taken the following grounds: -

“1 I. On the facts and circumstances of the case the Id. CIT(A) vide order u/s 250(6) dated 21,11,2023 has erred in confirming the addition made by the AO to the tune of Rs. 172200/- made u/s 69A on account of cash deposited during demonetization period.

2 2. That the I.d. CIT(A) has erred in confirming the addition of Rs. 1722000/.- without appreciating that the assessee was running a small business of sale purchase of electrical and other allied appliances. That the addition confirmed by the (II (A) is contrary to the fact that the C1T(A) had himself confirmed the action of the AO regarding the applicability of section 44AD to all the receipts other than amount deposited in demonetization period.

3 3. That the Ld. CIT(A) has erred in confirming the addition of Rs1722000.’- without appreciating that the Ld. AO has erred in treating a part of the deposits as business income and the balance deposits made during demonetization as unexplained money u/s 69A.

4 4. That the Ld. CIT(A) has erred in confirming the addition under section 69A ignoring the fact that the provisions of section 69A cannot be applied where no books of accounts were maintained.

5 5. That without prejudice to the aforesaid, the Ld. CTT(A) has erred in not appreciating that all the credits in bank are in respect of sales and as such the addition has to be restricted to profit element @ 8% as per the provisions of section 44 AD. Furthermore, the CIT(A) has failed to appreciate that entire sale cannot be profit.

6 6. That the Ld. (.TH A) lias cited in confirming the addition of Rs.1722000/- by not appreciating that the debits in the same bank account represent the amount expended for business purposes and as such, addition made u/s 69A is untenable.

7 7. That the Ld. CIT(A) has erred in confirming the addition of Rs. 1722000 on surmises and conjectures and without bringing on record any material jo prove that the appellant was in receipt of any income other than business income from business of sale- purchase of electrical and other allied appliances.

8 8. That the appellant craves leave to add or amend the grounds of appeal before the appeal is heard and disposed off.”

2.1. The assessee has taken the Additional ground: -

“1. That the CIT(A) has failed to consider that the assesse is distributor & Net Profit rate of 8% is not justified in this trade considering the net profit rate accepted by department in subsequent years.”

3. Tersely we advert the fact of the case. The assessee is a trader off electrical items, running the business in the name and style of “War Electrical Store”. Also, the assessee is an authorised dealer of ALPL (Ands Lite Pvt Ltd) within Baramulla and Kupwara district at Kashmir. The assessee is non filer of income tax return for the impugned assessment year. The notice under section 142(1) was issued to the assessee. The assessment was proceeded by the learned AO. It was found in assessment proceeding that the assessee deposited cash in bank account in J&K bank in different accounts. The total cash was deposited amount to Rs. 59,05,408/-. Out of that the ld. AO found that Rs.17,22,000/-was deposited in demonetization period. The rest amount of Rs. 41,83,408/-