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2016 (3) TMI 1222 - AT - Income TaxAddition on account of difference in the figures of purchases, sales and closing stock as per books of account and those as per figures given to the bank for raising loan- Held that - Assessing Officer has made addition on account of all the figures without considering the facts that when he has believed trading and Profit & Loss Account filed with the bank as correct as per the figures given thereon, then the profit declared therein should have been accepted by the Assessing Officer. No further calculation should be made for the purpose of making addition against the assessee. We, therefore, set aside and modify the orders of authorities below and direct the Assessing Officer to adopt net profit of ₹ 1,06,980/- as declared in the trading and Profit & Loss Account submitted to the bank instead of ₹ 75,546/- declared in the return of income. We, therefore, confirm the finding of authorities below to that extent and direct the Assessing Officer to adopt the profit of ₹ 1,06,980/- for the purpose of computing income of the assessee. - Decided partly in favour of assessee. Addition on account of college fee payment and deposit in the bank account of Shri Navneet Singh Lamba - Held that - No merit in this ground of appeal of the assessee. The ld. counsel for the assessee admitted that son of the assessee Shri Navneet Singh Lamba was dependant and that no evidence have been produced to explain the above additions. Since the source of fee deposited in the account of Shri Navneet Singh Lamba and source of bank deposit in the account of Shri Navneet Singh Lamba have not been explained who is admitted to be minor son of the assessee, authorities below were justified in making and confirming both the above additions in the hands of the assessee. In the absence of any explanation, no evidence or cogent material on record, we do not find any error in the orders of authorities below in making the addition - Decided against assessee Addition on account of college fees payment of son of the assessee and addition on account of deposit in State Bank of India, Paonta Sahib - Held that - It is admitted fact that son of the assessee was dependant upon assessee and no source. There is a deposit of the fees in the Law College in the name of son of the assessee and bank deposit with State Bank of India, Paonta Sahib. The assessee failed to explain source of these deposits therefore, authorities below were justified in making the addition in the hands of the assessee. No evidence have been produced before us to explain both these additions therefore, in the absence of any evidence on record, we confirm both the additions and dismiss this ground of appeal of the assessee. Addition on account of investment in FDRs by two sons of the assessee - Held that - No merit in this ground of appeal of the assessee as it is admitted fact that assessee purchased FDRs in the names of two of his sons during assessment year under appeal. The assessee failed to explain source of the purchase of the FDRs and also failed to explain that when both of his sons were students, how they could have purchase the FDRs. In the absence of any evidence or material on record, we confirm the addition and dismiss this ground of appeal of the assessee. Disallowance on account of various expenses - Held that - We are of the view addition is excessive. The personal user of these expenses cannot be ruled out. However, considering the nature of business carried out by the assessee, 30% of expenses is on higher side. We, accordingly, set aside and modify the disallowance and direct the Assessing Officer to make disallowance of 10% out of these expenses. In the result, this ground of appeal of the assessee is partly allowed.
Issues Involved:
1. Addition due to differences in figures of purchases, sales, and closing stock. 2. Addition on account of college fee payment and bank deposit of Shri Navneet Singh Lamba. 3. Addition on account of college fee payment and bank deposit of Shri Avneet Singh Lamba. 4. Addition on account of investment in FDRs by assessee's sons. 5. Disallowance of various expenses. Issue-Wise Detailed Analysis: 1. Addition due to differences in figures of purchases, sales, and closing stock: - Assessment Year 2006-07: The assessee challenged the addition of Rs. 4,57,565/- due to discrepancies between the figures submitted to the bank for loan purposes and those in the books of account. The Assessing Officer (AO) found significant differences, indicating that the figures provided to the bank were original and the book results were fabricated. The assessee argued that the bank statements were based on incomplete data. However, the AO did not accept this explanation and made an addition based on the differences. The CIT(A) confirmed the addition, relying on a previous order and a decision by the Madras High Court. The Tribunal noted that the difference in profit was minimal and directed the AO to adopt the net profit of Rs. 1,06,980/- as declared in the bank statement, instead of Rs. 75,546/- declared in the return of income. - Assessment Year 2007-08: The issue was similar, with an addition of Rs. 14,35,942/- due to discrepancies in figures. The AO applied a GP rate of 54% based on the difference in sales figures. The Tribunal, following the reasoning for the previous year, directed the AO to adopt the net profit of Rs. 1,32,677/- as declared in the bank statement. 2. Addition on account of college fee payment and bank deposit of Shri Navneet Singh Lamba: - Assessment Year 2006-07: The assessee challenged the addition of Rs. 28,611/- for college fees and Rs. 53,200/- deposited in the bank account of Shri Navneet Singh Lamba. The AO found that the fees were confirmed by the college principal and the bank deposit was unexplained. The CIT(A) confirmed the addition, noting that Shri Navneet Singh Lamba was not filing returns and the story of tuition income was concocted. The Tribunal upheld the addition, agreeing that the sources were not explained. - Assessment Year 2007-08: A similar issue arose with an addition of Rs. 7,434/- for college fees and Rs. 14,390/- for bank deposits. The Tribunal dismissed the ground, following the reasoning for the previous year. 3. Addition on account of college fee payment and bank deposit of Shri Avneet Singh Lamba: - Assessment Year 2006-07: The assessee challenged the addition of Rs. 29,900/- for college fees and Rs. 1,51,300/- deposited in the bank account of Shri Avneet Singh Lamba. The AO found that the fees were confirmed by the college principal and the bank deposit was unexplained. The CIT(A) confirmed the addition, following the findings for Shri Navneet Singh Lamba. The Tribunal upheld the addition, agreeing that the sources were not explained. - Assessment Year 2007-08: A similar issue arose with an addition of Rs. 29,900/- for college fees and Rs. 99,296/- for bank deposits. The Tribunal dismissed the ground, following the reasoning for the previous year. 4. Addition on account of investment in FDRs by assessee's sons: - Assessment Year 2006-07: The assessee challenged the addition of Rs. 2 lacs for FDRs purchased in the names of his sons. The AO noted that the sons were students and the source of funds was unexplained. The CIT(A) confirmed the addition for lack of explanation. The Tribunal upheld the addition, agreeing that the source of funds was not explained. 5. Disallowance of various expenses: - Assessment Year 2006-07: The assessee challenged the disallowance of Rs. 18,086/- for personal use of telephone, vehicle running expenses, and car depreciation. The AO disallowed 30% for personal use. The CIT(A) dismissed the appeal. The Tribunal found the disallowance excessive and directed the AO to restrict it to 10%. - Assessment Year 2007-08: A similar issue arose with a disallowance of Rs. 16,940/-. The Tribunal directed the AO to restrict the disallowance to 10%, following the reasoning for the previous year. Conclusion: In both assessment years, the appeals were partly allowed. The Tribunal directed the AO to adopt the net profit figures as declared in the bank statements and restricted the disallowance of expenses to 10%. Additions related to college fees, bank deposits, and FDR investments were upheld due to lack of explanation.
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