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2010 (1) TMI 898 - AT - Income TaxGross profit at higher rates - defects in the books of accounts maintained by the assessee - discrepancies were found by the Assessing Officer on the basis of examination of books of account and on the basis of reply received in response to notice u/s. 133(6) of the Act. There is also no dispute to the fact that despite opportunities given by the Assessing Officer, the assessee was unable to satisfy the Assessing Officer regarding the various discrepancies pointed out by him - Held that - action of the Assessing Officer as regards the rejection of the book result is upheld, adoption of 10% GP rate as against 10.19% held by the CIT(A), will meet the ends of justice, direct accordingly. The ground raised by the Revenue is dismissed and the ground raised by the assessee is partly allowed. Addition on account of gift being considered as unexplained cash credit though the donor has confirmed the transaction - accepting a gift as genuine the onus is always on the assessee to prove to the satisfaction of the Assessing Officer regarding the identity and creditworthiness of the donor and the genuineness of the transaction Held that - merit in the submission of the learned DR that the gift of Rs.1 lakh is against human probability, Supreme Court in the case of Sumati Dayal (1995 - TMI - 5469 - SUPREME Court) squarely applicable to the facts of the present case, no infirmity in the order of the CIT(A) in confirming the addition of Rs.1,00,000 made by the Assessing Officer u/s. 68 of the I.T. Act and the same is accordingly upheld. This ground by the assessee is, therefore, dismissed.
Issues Involved:
1. Rejection of books and estimation of gross profit rate. 2. Addition of Rs. 1,00,000 on account of unexplained cash credit (gift). 3. Calculation of interest under Section 234C. 4. Addition of Rs. 10,40,000 under Section 68 of the Income-tax Act, 1961. Detailed Analysis: 1. Rejection of Books and Estimation of Gross Profit Rate: The assessee challenged the rejection of its books and the estimation of gross profit (GP) at higher rates by the Assessing Officer (AO). The AO identified discrepancies in the books, such as incorrect entries and unsubstantiated purchases, leading to the rejection of the book results and the estimation of a GP rate of 13.88%. The CIT(A) directed the AO to adopt a GP rate of 10.19%, considering the turnover volume. The tribunal upheld the rejection of the book results due to discrepancies but modified the GP rate to 10%, balancing the facts of the case. 2. Addition of Rs. 1,00,000 on Account of Unexplained Cash Credit (Gift): The assessee received a gift of Rs. 1,00,000 from a subcontractor, which the AO treated as unexplained cash credit under Section 68, citing the donor's inadequate financial capacity. The CIT(A) upheld this addition, noting the close connection between the assessee and the donor and doubting the donor's creditworthiness. The tribunal confirmed this decision, emphasizing the need for the assessee to prove the genuineness, identity, and creditworthiness of the donor, which was not satisfactorily established. 3. Calculation of Interest Under Section 234C: The assessee contested the calculation of interest under Section 234C based on assessed income instead of returned income. The tribunal found merit in the assessee's contention and directed the AO to recalculate the interest based on the returned income, as per the provisions of Section 234C. 4. Addition of Rs. 10,40,000 Under Section 68: The AO added Rs. 10,40,000 as unexplained cash credit under Section 68, noting the unexplained deposit in the assessee's bank account. The CIT(A) directed the AO to verify the genuineness of the cash balance as per the balance sheet on record. The tribunal upheld this direction, finding no infirmity in the CIT(A)'s order, and dismissed the Revenue's appeal on this ground. Conclusion: The tribunal partly allowed the assessee's appeal by adjusting the GP rate and recalculating interest under Section 234C, while upholding the additions for unexplained cash credit and the rejection of books. The Revenue's appeal was dismissed, confirming the CIT(A)'s directions for verification of cash balance.
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