2015 (8) TMI 1091 - AT - Income Tax

Estimation of net profit - assessee did not produce the complete books of account and he filed an affidavit that there was a dispute with the accountant and he was not given the books of account. - Held that - On verification of asset disclosed by the assessee, he has only Jeap. It appears that this computer owned by the somebody else, therefore, the claim of assessee that accountant had taken books of account appears to be false. Accordingly, we confirm the net profit @ 9% subject to third party interest and depreciation. The Assessing Officer is directed to verify this aspect from the past record whether the assessee s net profit was assessed subject to interest and depreciation if otherwise found by the Assessing Officer no interest and depreciation will be allowable on the net profit decided by the Bench @ 9%. Accordingly, we confirm the order of the ld CIT(A). - Decided against revenue. Unaccounted cash deposited in the bank account - undisclosed income of the assessee - Held that - On verification of the balance sheet of the assessee, it is found that bank account in SBBJ, Gangapur City, SBBJ, Sawai Madhopur and FDR with PNB, Gangapur City has been disclosed by the assessee. The ld CIT(A) has considered these bank accounts and no adverse inference has been drawn by him except the addition of ₹ 9,026/-. This Bench has confirmed the addition @ 9% C.P., therefore, no addition is required to be made on account of any discrepancy in the bank account. As held in the case of CIT Vs. G. K. Contractor (2009 (1) TMI 840 - RAJASTHAN HIGH COURT) wherein held that when net profit is estimated by the Assessing Officer by rejecting the book result U/s 145(3) of the Act, no separate addition can be made on account of cash creditor, which is squarely applicable in the case of the assessee. As we have already decided the net profit @ 9% in the case of assessee, therefore, other additions cannot be made. - Decided against revenue. FDR interest treated as income from other sources - Held that - Undisputed fact revealed from the order of the ld CIT(A) and form No. 35 that this ground has not been raised before the ld CIT(A). Further before us, no application for additional ground has been made by the AR of the assessee. Therefore, this ground is not maintainable and we accordingly dismiss the same. - Decided against assessee.

Summary

Issues Involved:
1. Arbitrary Net Profit Ratio Assessment
2. Consideration of FDR Interest as Income from Other Sources
3. Deletion of Additions on Account of Bank Credits and Unexplained Cash Deposits

Issue 1: Arbitrary Net Profit Ratio Assessment

The primary contention revolves around the net profit ratio applied by the Assessing Officer (A.O.) and sustained by the Commissioner of Income Tax (Appeals) [CIT(A)]. The A.O. applied a net profit (NP) ratio of 12.50% instead of the 5.66% declared by the assessee, citing non-cooperation and incomplete books of account. The CIT(A) reduced this to 9%, considering the turnover of the assessee. The assessee argued that the books were audited and proper, but certain documents couldn't be produced due to a dispute with the accountant. The Tribunal upheld the CIT(A)'s decision to apply a 9% NP rate, subject to verification of interest and depreciation from past records.

Issue 2: Consideration of FDR Interest as Income from Other Sources

The assessee contended that the interest earned on Fixed Deposit Receipts (FDRs) should be considered as business income rather than income from other sources. The FDRs were made to obtain bank guarantees required for contract awards. However, this issue was not raised before the CIT(A) and no application for additional ground was made before the Tribunal. Consequently, the Tribunal dismissed this ground as not maintainable.

Issue 3: Deletion of Additions on Account of Bank Credits and Unexplained Cash Deposits

The A.O. added Rs. 4,08,112/- by applying a 12% NP rate on cash deposits in the bank account, treating them as undisclosed income. The CIT(A) found most entries to be transfer entries from other bank accounts and reduced the addition to Rs. 9,026/-. The Tribunal confirmed that no separate addition is required when net profit is estimated, following the precedent set by the Rajasthan High Court in CIT Vs. G. K. Contractor.

Regarding the unexplained cash deposits of Rs. 7,98,000/-, the CIT(A) provided telescopic benefit, considering the net profit addition upheld. The Tribunal agreed that no further addition is warranted when a net profit rate is applied.

Conclusion:

In summary, the Tribunal upheld the CIT(A)'s decision to apply a 9% NP rate, dismissed the ground regarding FDR interest as not maintainable, and confirmed that no separate additions are required when net profit is estimated. Both the assessee's and the revenue's appeals were dismissed.