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Judgment
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER :
This captioned appeal has been filed by the assessee against the order of the learned Commissioner of Income Tax (Appeals)/NFAC Delhi [‘CIT(A)’ in short] dated 30.12.2025 arising from the assessment order dated 28.04.2023 under Section 147 r.w.s. 144 r.w.s 144B of the Income Tax Act, 1961 (‘the Act’) by the Assessing Officer, National e-Assessment Centre concerning Assessment Year (A.Y.) 2015-16.
Brief facts of the case are that the assessee is an individual, engaged in the business of trading in lubricants and greases as proprietor of M/s Shri Oil Company. The assessee filed its return of income along with audited report at Rs.3,79,370/-. Later on, the department detected two bank accounts with ICICI Bank Ltd. wherein some cash and other than cash, was deposited during the year. The assessee deposited in account no. 628505013247 with ICICI Bank Ltd. Rs. 48,74,677/- and in Bank account no. 628501023714, deposited Rs. 2,31,514/- taking the total amount to Rs. 51,06,191/-. The Assessing officer passed an order under section 147/144/144B of the Act on 28.04.2023 adding an amount of Rs.51,06,191/-
Aggrieved, assessee was in appeal before the CIT(A)/NFAC. CIT(A)/NFAC in his order given partial relief to the assessee by observing as under:
“Keeping in view the overall facts and circumstances, the nature of trading activity, and the principle that profit embedded in undisclosed turnover must be higher than that declared in the regular books, estimation of income by applying a net profit rate of 8% on the total deposits of Rs.51,06,191/- is found to be fair, reasonable, and in accordance with settled principles. This rate adequately balances the interest of revenue with the requirement of determining real income and avoids undue harshness that would result from taxing the entire deposits as income. Accordingly, the addition made by treating the entire amount of Rs.51,06,191/-as unexplained money under section 69A is modified. The Assessing Officer is directed to compute the income by applying a net profit rate of 8% on the total deposits of Rs.51,06,191/- and restrict the addition to the income so computed.”
Aggrieved by the order of CIT(A)/NFAC, assessee is now in appeal before us with the following grounds:
“1.In view of the facts and circumstances and supporting evidences placed on record before the Assessing officer and then before the commissioner of income tax appeal. The ld. CIT(A) is erred in law and otherwise on facts holding and direct the assessing officer to compute the income in tune of Rs. 4,08,495/- by applying a net profit rate of 8% on total deposit of Rs. 51,06,191/- which is most excessive in the line of business as against the offered net profit rate of 4.35% which is most justified very particularly declared and accepted during the year under appeal by the department in regular business of appellant/assessee.
2.The appellant/assessee craves, leave to take additional grounds of appeal before or at the time of hearing of the appeal and/or modify any of the above grounds.”
At the outset, learned AR pointed out that it is the case of addition made on account of unexplained cash deposited under section 69A of the Act. The Assessing officer has not considered the withdrawals in the same account, the withdrawals from account no. 628505013247 Rs. 48,94,322/- and from account no. 628501023714 of Rs. 2,25,000/-.
Per contra, learned DR relied upon the order of CIT(A).
We have heard the learned DR and perused the material available on record. We find that the AO has added the entire deposit made in two bank accounts of ICICI Bank amounting at Rs. 51,06,191/- as unexplained deposits whereas the CIT(A) considered the profit embedded in the undisclosed turnover for taxation and estimated the income by applying the net profit of 8% of the total deposit of Rs.51,06,191/-.
In the instant case, we find that the assessee has attempted to prove the entire source of cash deposit as cash sales and cash withdrawals. Although the assessee, prima facie, appears to have discharged its onus of explaining source of cash deposit, it’s contentions to prove the source, hardly deserves to be accepted in entirety especially when the AO found such bank accounts were not disclosed in the Income Tax Returns of the assessee. On the other hand, the Revenue’s endeavour to disbelieve the assessee’s contention that cash deposit has been made out of sales and withdrawals, cannot be fully justified. In this factual matrix, there is some element of failure to explain some of the cash deposit, cannot be ruled out. Be that as it may, it is deemed appropriate, in larger interest of justice, that a lump-sum addition of 5% of the deposits made of Rs.51,06,191/-only would be just and proper to consider as profit embedded in the deposits, with a rider that the same shall not be treated as a precedent, so as to cover all loopholes. The ground of appeal no 1 is partly allowed.
In the result, appeal filed by the assessee in ITA No.1225/Del/2026 is partly allowed.