ITAT Backs Presumptive Tax for Fruit Trader, Deletes Rs. 3.29 Cr Addition

The assessee, a small-time fruit trader who deals in perishable goods like grapes, failed to file his return for AY 2013–14. The AO claimed cash deposits of Rs. 3.29 crore in his bank accounts as unexplained money under Section 69A, based on input from the Actionable Information Monitoring System (AIMS). An ex parte order was issued under s. 147 read with s. 144 because the assessee did not reply to notices as they were sent to an outdated, inactive email. The entire amount was taxed under Section 115BBE by the AO, which treated it as undisclosed income.

The assessee argued the transactions were part of his brokering activity, wherein fruits were received on an approval basis, sold with a 1% commission, and the remaining sale proceeds returned to farmers. To support his contentions, the assessee also provided agricultural land records and farmer affidavits. By removing the majority of the Rs. 3.29 crore addition and estimating income at 8% of confirmed turnover (Rs. 1.92 crore) under Section 44AD, the CIT(A) partially granted the appeal. Aggrieved, the assessee filed an appeal with the CIT(A), claiming that he was only paid 1% commission for his work as a fruit broker. The CIT(A) partially granted the appeal by removing the majority of the Rs. 3.29 crore addition and estimating income at 8% of confirmed turnover under Section 44AD.

Issue Raised: Whether the full amount of cash deposits should be considered business receipts subject to Section 44AD presumptive taxation or unexplained income under Section 69A, particularly in the absence of official returns but with proof of trading activity.

ITAT’s Decision: The Tribunal held that the AO only used AIMS data without any verification or investigation of his own and thus upheld the CIT(A)’s decision to remove the Rs. 3.29 crore addition. The tribunal observed that the assessee had adequately demonstrated his business activity through bank statements, farmer affidavits, and regular transaction patterns. However, it was held that the profit estimation should be applied using the actual brokerage earned (Rs. 1.91 lakh), not at 8%, when the assessee provided farmer affidavits verifying a 1% commission model and no opposing material was submitted by the AO. As a result, the ITAT rejected the Revenue’s appeal and fully granted the assessee’s appeal.

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