2013 (4) TMI 825 - AT - Income Tax

Summary

Issues Involved:
1. Legality of the CIT(A)'s order.
2. Restriction of extra profit addition.
3. Deletion of addition on account of sundry creditors.
4. Deletion of addition on account of unsecured loan.

Summary:

1. Legality of the CIT(A)'s order:
The Revenue contended that the CIT(A)'s order was erroneous in law and on facts. However, the Tribunal upheld the CIT(A)'s order, finding no contrary material presented by the Revenue to challenge the CIT(A)'s findings.

2. Restriction of extra profit addition:
The Assessing Officer (AO) estimated the turnover at Rs. 2,60,00,000/- and applied a 10% profit rate, resulting in an addition of Rs. 25,52,920/-. The CIT(A) restricted the turnover to Rs. 2,48,62,028/- and applied a 1% profit rate. The Tribunal found that the AO's estimation lacked basis and evidence, and the CIT(A) rightly restricted the profit rate to 1%, considering the assessee's reasonable profit declaration and the absence of contrary material from the Revenue.

3. Deletion of addition on account of sundry creditors:
The AO added Rs. 33,70,172/- as sundry creditors, treating them as bogus due to the assessee's failure to establish them. The CIT(A) deleted the addition, citing the Hon'ble Allahabad High Court's judgment in CIT vs. Gaghvendra Pratap Singh, which held that additions u/s 68 cannot be made when books of accounts are rejected. The Tribunal, while not agreeing with the CIT(A)'s reasoning, found that the assessee had discharged its burden by providing detailed accounts and evidence, and the AO's addition was based on presumption without specific examination of transactions.

4. Deletion of addition on account of unsecured loan:
The AO added Rs. 13,00,000/- as an unsecured loan from Shri Ajay Kumar Kejriwal, questioning the creditworthiness of the depositor. The CIT(A) deleted the addition, following the same judgment as above. The Tribunal, while disagreeing with the CIT(A)'s reasoning, found that the assessee had provided sufficient evidence of the depositor's identity, creditworthiness, and genuineness of the transaction, thus discharging its burden u/s 68. The addition was deemed unwarranted.

Conclusion:
The Tribunal dismissed the Revenue's appeal, confirming the CIT(A)'s order on all issues.