2015 (12) TMI 1374 - AT - Income Tax

Addition u/s 69 for unexplained investment - Held that - In the case under appeal also there has been no finding by the Assessing Officer about the defects of books of accounts as well as detection of undisclosed investment which may have been made by the assessee from the undisclosed sales. In these circumstances it will not be justifiable to impose GP @ 16.78% on the undisclosed turnover when separate additions has already been made for peak credit, cash deficit and payments towards capital nature of expenditure and as such Net Profit rate shown by the assessee on the disclosed turnover should be applied on the undisclosed credits of ₹ 25,64,264/- and by application of Net Profit rate of 4.8% on ₹ 25,64,264/- the sustained addition of ₹ 4,30,283/- will scale down to ₹ 1,24,110/-. In other words, assessee will get relief of ₹ 3,03,173/- and the total sustained addition of ₹ 8,39,832/- referred in ground no.1 will be reduced to ₹ 5,33,659/-. Addition on account of unexplained investment in FDI - Held that - Assessee has accepted that the credits in the disclosed bank account were not shown in the books of account and did not put forth any proper explanation for these cash deposits in its account and further most of the withdrawals from this bank account have been made for payment to Kotak Securities Ltd. for share trading business. This means that flow of funds in this account was not at all related to the business of job of jari kasab done by the assessee and, therefore, the contention of the ld. AR for applying net profit rate on this amount of ₹ 2,25,977/- cannot be accepted and accordingly we are of the view that ld. CIT(A) has rightly confirmed this addition of unexplained investment in the hands of the assessee and as such this ground of the assessee is dismissed. Addition as unaccounted fixed deposits as income u/s 69 - Held that - As during assessment proceedings Assessing Officer found that assessee had made investments in cash certificates in various banks in the form of Fixed Deports and these Fixed Deposits were jointly held by the assessee with either his father or mother or his wife and the photo of the assessee was appearing on these Fixed Deposits and these Fixed deposits were not reflected in the balance sheet of any of the other joint holders and therefore, this amount was added as unexplained investments. Even before ld. CIT(A) no evidence has been furnished by the assessee to show that he was not the actual beneficiary of the Fixed Deposits and was unable to prove that Fixed Deposits related to any other year and therefore, ld. CIT(A) did not give any relief to the assessee. Even before us also nothing contrary has been produced to prove that these Fixed Deposits relate to any other year or Fixed Deposits are not related to the assessee. Therefore, it seems that assessee has nothing to say more to substantiate its ground and in these circumstances, we dismiss this ground of assessee.

Summary

Issues Involved:
1. Addition u/s 69 for unexplained investment.
2. Addition on account of unexplained investment in FDI.
3. Confirmation of addition of undisclosed ICICI bank account.
4. Addition in respect of account with Surat Peoples Co-operative Bank Ltd.
5. Addition of unaccounted fixed deposits as income u/s 69.
6. Consideration of various explanations, submissions, and evidences.
7. Levy of interest u/s 234A/234B/234C & 234D.
8. Initiation of penalty u/s 271(1)(c).

Issue-wise Detailed Analysis:

1. Addition u/s 69 for Unexplained Investment:
The assessee's appeal against the addition of Rs. 27,90,310/- under section 69 for unexplained investment was addressed. The CIT(A) reduced the addition to Rs. 8,39,832/-. This reduction was based on the peak credit balance, gross profit rate of 16.78% on trading transactions, cash deficit, payments of capital nature, and interest earned. The Tribunal further scaled down the addition by applying a net profit rate of 4.8%, reducing the sustained addition to Rs. 5,33,659/-. The Tribunal found no defects in the books of accounts and no evidence of undisclosed investment, justifying the application of the net profit rate.

2. Addition on Account of Unexplained Investment in FDI:
The assessee contested the addition of Rs. 2,15,531/- as unaccounted fixed deposits. The CIT(A) and the Tribunal upheld the addition, noting that the fixed deposits were jointly held with family members, but the assessee failed to provide evidence proving that these deposits belonged to third parties or pertained to another year.

3. Confirmation of Addition of Undisclosed ICICI Bank Account:
The undisclosed ICICI bank account with total credits of Rs. 25,64,264/- was a significant issue. The CIT(A) categorized the addition into peak credit, gross profit, cash deficit, capital payments, and interest. The Tribunal agreed with the CIT(A)'s categorization but adjusted the gross profit rate to a net profit rate of 4.8%, reducing the total addition.

4. Addition in Respect of Account with Surat Peoples Co-operative Bank Ltd.:
The assessee's appeal against the addition of Rs. 2,25,977/- for undisclosed transactions in this account was dismissed. The Tribunal found that the transactions were not shown in the books and were used for share trading, unrelated to the assessee's business. Thus, the addition was upheld.

5. Addition of Unaccounted Fixed Deposits as Income u/s 69:
The assessee's argument that the fixed deposits belonged to third parties and pertained to another year was rejected. The Tribunal upheld the addition, noting that the assessee failed to provide evidence to support his claim.

6. Consideration of Various Explanations, Submissions, and Evidences:
The assessee's general ground that the lower authorities did not consider various explanations and evidences was dismissed as it was of a general nature and did not require adjudication.

7. Levy of Interest u/s 234A/234B/234C & 234D:
The ground regarding the levy of interest under sections 234A, 234B, 234C, and 234D was noted as consequential and did not require separate adjudication.

8. Initiation of Penalty u/s 271(1)(c):
The ground regarding the initiation of penalty under section 271(1)(c) was considered premature and was dismissed.

Conclusion:
The Tribunal partly allowed the assessee's appeal, reducing the total sustained addition from Rs. 8,39,832/- to Rs. 5,33,659/-. The Tribunal upheld the additions related to the undisclosed bank accounts and fixed deposits, while adjusting the addition based on the net profit rate. The grounds related to interest and penalty were noted as consequential and premature, respectively.