2015 (12) TMI 1412 - AT - Income Tax

Addition on account of low GP - CIT(A) deleted the addition of Gross profit at 10% of total turnover made by the Assessing Officer - Held that - Decided in favour of the assessee by decision of a coordinate bench, in the group cases of ITO vs. S. N. Rathi & Others 2015 (12) TMI 766 - ITAT AHMEDABAD Assessing Officer did not point out any comparable cases or any special material which has an influence for giving rise to such a profit. The other discussion made by Assessing Officer in assessment order relates to the issue, as to why alleged books of accounts should not be rejected. But after rejection of the books, the ld. Assessing Officer failed to substantiate his conclusion for computing the profit at @ 10% of the turnover. Taking into consideration the finding of the Commissioner of Income Tax(A), we do not see any reason to interfere in his orders in all the assessment years. Thus, grounds of appeal of the assessee as well as by the revenue on this issue, in all these assessment years are rejected. The Ld. Assessing Officer shall compute the profit from the benami bank accounts @ 2.45% of the turnover - Decided against revenue. Addition on account of cash credit - CIT(A) deleted the addition - Held that - In the absence of any infirmities having been pointed out in the reasoning adopted by the ld. CIT(A), we see no reasons to disturb the conclusions arrived at in respect of addition for unexplained credits of ₹ 3,00,000/- and ₹ 2,00,000/- having been deleted. The interest disallowance is only consequential in nature, and, there is no good reason to disturb the same either.- Decided against revenue.

Summary

Issues:
1. Addition of Gross profit at 10% of total turnover
2. Addition on account of cash credit
3. Addition on account of unexplained addition to capital

Issue 1: Addition of Gross profit at 10% of total turnover
The Assessing Officer disputed the correctness of the CIT(A)'s order regarding the addition of Gross profit at 10% of the total turnover. The assessee, part of the "Rathi group of cases," faced estimation of gross profit at 10% due to the unavailability of account books post a survey. The AO added unexplained credit of Rs. 3,00,000 and disallowed interest of Rs. 3,115. Additionally, Rs. 2,00,000 was added for unexplained capital addition. The CIT(A) overturned these additions, highlighting that the AO's reasoning lacked substance. The CIT(A) emphasized that the special auditor found no issues with the regular books, and the AO failed to justify the additions adequately. The Coordinate Bench's decision in a similar case favored the assessee, emphasizing the need for a reasonable profit estimation based on comparable cases and auditor opinions.

Issue 2: Addition on account of cash credit
The second issue pertained to the addition on account of cash credit amounting to Rs. 3,03,115 and interest thereon. The CIT(A) observed that the necessary confirmations and sources were submitted to the AO during assessment proceedings, establishing the credibility of the creditor and the source of capital addition. The CIT(A) directed the deletion of these additions, which was supported by the absence of contradictory evidence or inconsistencies in the record. The Coordinate Bench's decision further reinforced the deletion of similar additions in group cases, endorsing the CIT(A)'s findings.

Issue 3: Addition on account of unexplained addition to capital
Regarding the addition of Rs. 2,00,000 on account of unexplained addition to capital, the CIT(A) found the submissions made by the assessee regarding the source and confirmation of the capital addition satisfactory. The CIT(A) directed the deletion of this addition, and the Coordinate Bench's decision supported this stance. No discrepancies or irregularities were identified in the provided details, leading to the affirmation of the CIT(A)'s decision to delete the addition.

In conclusion, the ITAT Ahmedabad upheld the CIT(A)'s order, dismissing the appeal and declining to interfere with the conclusions reached on the issues of Gross profit addition, cash credit addition, and unexplained capital addition. The decisions were supported by the lack of substantial grounds to challenge the CIT(A)'s well-reasoned findings and the consistency with the Coordinate Bench's rulings in similar cases.