2013 (8) TMI 1102 - AT - Income Tax

Summary

Issues involved: Rejection of books of account u/s 145(3), estimation of income at 5% of gross receipts, addition of interest credited to P&L A/C.

Rejection of books of account u/s 145(3): The Assessing Officer (A.O.) rejected the books of account of the assessee due to self-prepared vouchers that lacked supporting evidence for expenditures, including labor expenses. The A.O. applied a 6% profit rate on total receipts and calculated a profit of &8377; 24,96,150. The Commissioner of Income Tax (CIT) upheld the rejection of books under Section 145(3) as the labor expenses were non-verifiable, and the profit rate was deemed low at 3.01%. The CIT confirmed the A.O.'s decision, stating that the books were audited based on self-made vouchers without supporting evidence, leading to the rejection u/s 145(3).

Estimation of income at 5% of gross receipts: The CIT reduced the profit rate from 6% to 5%, resulting in a calculated profit of &8377; 20,80,125 instead of the initial &8377; 24,96,150. The CIT found the A.O.'s addition of interest income to be correct, as the interest was already shown in the profit & loss account of the firm. The CIT dismissed the appellant's claim of double addition, stating that the A.O. had appropriately included the interest income in the profit estimation.

Addition of interest credited to P&L A/C: The Tribunal confirmed an addition of &8377; 1,00,000 to cover identified lapses, considering the nature of the business and past history. The Tribunal directed the A.O. to add only &8377; 1,00,000 to the declared income, deleting the balance addition. As the interest income was already disclosed in the profit & loss account, no separate addition was warranted, and the ground related to this issue was allowed.

Conclusion: The appeal was partly allowed, with the Tribunal confirming the rejection of books u/s 145(3) and adjusting the profit rate to 5%. The addition of interest income was upheld to cover identified lapses, with a specific amount added to the declared income. The separate addition for interest income was deemed unnecessary, and the appeal was partially allowed.