2013 (11) TMI 366 - AT - Income Tax

Addition on account of not providing the basis of income - Income at Rs.90 lakhs as per the declaration made u/s 132(4) of the Act Held that - Assessee had not spelt out the basis of arriving at the income at Rs.90 lakhs which goes without saying that the assessee had presumably arrived at that figure only on estimation - Assessee had admitted before the first appellate authority that there was change of hands of black money also in the sale proceeds of the said commercial complex. CIT (A), had arrived at the gross sale proceeds at Rs.4,91,59,484/- as against the assessee s working of Rs.3.44 crores which was not supported by proper books of accounts. Taking into account the assessee s offer of net profit at Rs.90 lakhs which works out to 18.3% on a turnover of Rs.4.91 crores considered to be too low and that of the AO s working of Rs.2,24,66,173/- which comes to a net profit at 45.7% appeared to be on the higher side, the CIT (A) took a plausible view of 25% of the total turnover of Rs.4.91 crores. The CIT (A) has worked out the net profits on the basis of seized materials in course of search - Working of the CIT (A) has not been contradicted by the learned AR with any documentary evidence Decided against the Assessee.

Summary

Issues Involved:

1. Whether the CIT (A) erred in adopting the net profit at 25% as against 18.3% declared by the assessee.
2. Whether the CIT (A) erred in adopting the net profit at 25% on the sale proceeds from 'Pam Arcade' as against 45.7% adopted by the AO.
3. Issue of interest levied u/s 234A, 234B, and 234C.

Issue-wise Detailed Analysis:

1. Adoption of Net Profit at 25% vs. 18.3% Declared by the Assessee:

The assessee firm, a builder and developer, constructed a commercial complex named 'Pam Arcade.' During a search operation under section 132 at the business premises of one of the partners, incriminating documents were found, including sale deeds for shops in 'Pam Arcade.' The assessee initially did not furnish its return of income for the assessment year 2009-10, leading to a notice under section 142(1). The AO proposed to assess the income at Rs.2.24 crores based on seized material, but the assessee later submitted a return admitting a total income of Rs.90 lakhs. The AO concluded that the assessee had earned a total profit of Rs.2.24 crores but accounted for only Rs.90 lakhs, thereby suppressing Rs.1.34 crores.

The CIT (A) examined the issue and determined that the net profit percentage should be 25% of the total turnover of Rs.4.91 crores, resulting in a profit figure of Rs.1,22,89,871/-. The CIT (A) found the assessee's declared net profit of 18.3% too low and the AO's 45.7% too high. The CIT (A) based this on various presumptions about the sale prices of shops on different floors and the lack of proper books of accounts from the assessee.

The Tribunal agreed with the CIT (A)'s reasoning, noting that the assessee had not provided a basis for the Rs.90 lakhs figure and had admitted to receiving unaccounted money. The CIT (A) had reasonably estimated the gross sale proceeds and net profit, considering the seized materials and the absence of proper accounts. The Tribunal found no reason to interfere with the CIT (A)'s decision.

2. Adoption of Net Profit at 25% vs. 45.7% Adopted by the AO:

The Revenue's appeal contested the CIT (A)'s adoption of a 25% net profit rate instead of the AO's 45.7%. The Tribunal reiterated its findings from the assessee's appeal, supporting the CIT (A)'s balanced approach. The CIT (A) considered the lack of clarity on actual costs and expenses and the unaccounted money in sales. The Tribunal upheld the CIT (A)'s decision as reasonable and justified, dismissing the Revenue's appeal.

3. Issue of Interest Levied u/s 234A, 234B, and 234C:

The assessee firm raised the issue of interest levied under sections 234A, 234B, and 234C, claiming it was not leviable based on a jurisdictional High Court decision. However, during the hearing, the assessee's representative acknowledged mistakes in the computation of interest and was advised to seek rectification from the appropriate authority under the Act. This issue was not further deliberated in the Tribunal's judgment.

Conclusion:

Both the assessee's and the Revenue's appeals were dismissed. The Tribunal upheld the CIT (A)'s decision to adopt a 25% net profit rate on the total turnover of Rs.4.91 crores, considering it a reasonable and balanced conclusion based on the available evidence and the absence of proper books of accounts. The Tribunal also advised the assessee to seek rectification of interest computation errors from the appropriate authority. The order was pronounced in the Open Court on 30th August 2013.