Amit Kumar vs Income Tax Officer, Ward 1

PER VIKAS AWASTHY, JM:

This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short ‘the CIT(A)’] dated 14.10.2025, for Assessment Year 2022-23.

The solitary addition assailed by the assessee in appeal is Rs. 10,95,053/- on account of estimation of Gross Profit (GP).

Shri Amit Kaushik, appearing on behalf of the assessee submits that the assessee is engaged in the business of wholesale trading of cotton waste. The assessee filed his return of income for AY 2022-23 declaring total income of Rs.10,35,570/-. The Assessing Officer (AO) without rejecting books of the assessee made presumptive addition by estimating gross profit at the rate of 3.94% as against 3.08% declared by the assessee. The solitary reason for estimation by the AO is that there is decline in the GP declared by the assessee in the impugned assessment year, as compared to the preceding assessment year. According, to the AO the gross profit of the assessee for AY 2022-23 is 2.67% of the total turnover, in comparison to 3.9% of the total turnover in the immediate preceding assessment year. He submits that the AO has erred in considering total credits of Rs.14,72,04,396/- as the turnover of the assessee. He submitted that the entire credits in the bank account cannot be considered as total turnover of the assessee. The assessee has declared total turnover for AY 2022-23 as Rs.9,55,84,856/-. There is no difference in the turnover declared by the assessee in ITR and as per the turnover reported under GST. He thus, prayed for deleting the addition.

Per contra, Shri Keshav Kishore Anand, representing the department vehemently supporting the impugned order prayed for dismissing appeal of the assessee. The ld. DR reiterating findings of AO submits that the assessee has failed to explain decline in gross profit in the impugned assessment year.

Both sides heard, orders of the authorities below examined. The solitary reason for making addition on estimation by the AO is that there is decline in gross profit in terms of percentage to the total turnover. The AO has taken total credits of Rs.14,72,04,369/- in the bank account of the assessee as total turnover. The entire credits in the bank account cannot be treated as turnover. The credits in the bank account can be on account of non -revenue items as well, viz. reimbursements of expenses, sale of capital assets, loans, etc. The AO without examining the nature of credits has erred in considering entire credits as business receipts of the assessee. Considering entire facts of the case, I find no reason to sustain the estimated addition made by AO on flawed approach and without pointing any defect in books of the assessee.

In the result, impugned order is set aside appeal of the assessee is allowed for statistical purposes.