2012 (9) TMI 181 - AT - Income Tax

Unexplained creditors - Addition on the basis of entries found in the books of account - only contention of the assessee is that as his income from the contract business was estimated by the AO @ 12.5% then addition on account of cash credit was not justified - Held that - CIT (A) estimated the profit of the assessee at 8 per cent of the contract receipts as if the total addition made by the AO is allowed to remain or accepted, then the net profit of the assessee is nearly 28 per cent., which is not at all possible in the nature of the work undertaken by the assessee - nowhere in the aforesaid decision it was held that when business income was estimated by the Revenue then the Revenue is precluded from making addition on account of unexplained cash credit. Thus no force in the submission of the assessee - assessee has not offered any explanation with regard to the source of Rs. 30,40,000/- credited in his capital account or any explanation with regard to the sundry creditors of Rs. 11,74,500/- added by the CIT (A) - against assessee. Charging interest u/s 234B - Held that - As the additions came to be made because the assessee failed to explain the source of credit of Rs. 30,40,000/- in his capital account and also could not give any explanation with regard to the sundry creditors of Rs. 11,74,500/-, thus no doubt the levy of interest u/s 234B and 234C are of mandatory nature - no force in the argument of assessee - against assessee.

Summary

Issues: Appeal against order of CIT(A) - Estimation of income and addition on unexplained cash credits; Charging of interest u/s 234B.

Estimation of Income and Addition on Unexplained Cash Credits:
The appellant, a civil contractor, challenged the CIT(A)'s decision to make further additions based on entries in rejected books of account. The Assessing Officer estimated income at 12.5% due to rejected books, making additional adjustments for unexplained credits and sundry creditors. The CIT(A) upheld this, citing legal precedents allowing separate additions for undisclosed income. The appellant argued that once income was estimated, no further additions should be made, citing a High Court decision. However, the tribunal noted that the cited case did not preclude additions for unexplained cash credits. As the appellant failed to explain cash credits and sundry creditors, the tribunal upheld the CIT(A)'s order, dismissing the appeal.

Charging of Interest u/s 234B:
The appellant contested the charging of interest u/s 234B, claiming lack of knowledge about additional assessments. Citing a High Court case, the appellant argued against the interest charge. However, the tribunal distinguished the case cited by the appellant, noting that it did not apply to the current scenario where additions were made due to lack of explanations for credits. As the interest was deemed consequential, the tribunal dismissed the appellant's argument and upheld the interest charge. Consequently, the appeal was dismissed, and the decision was pronounced on June 22, 2012, in Chennai.