2018 (2) TMI 1882 - AT - Income Tax

Addition u/s. 69A - difference in TDS as per Form No.26AS with the income admitted in the profit and loss account - addition by estimating the income at 3.5% of the purchase turnover - assessee claimed refund being tax collected at source on old gold purchased through jewellery auction - as per the assessee, Section 69A could not have been used for fixing a higher income when estimated rate of return was adopted - argument of the assessee was that he had participated in the auctions and had bidded for various parties like gold commission agents, goldsmiths, traders etc.and was only an agent participating in the auction - HELD THAT - Though the assessee states that he was participating in old gold auction done by M/s. Manappuram Finance Ltd, on behalf of various parties, he could not produce any confirmation from any such parties. Form No.26AS was in the name of the assessee and this admittedly reflected purchases of gold worth @23,32,17,428/-. Assessee had also claimed refund for the tax of @17,45,898/- collected at source. Assessee having failed to produce any evidence in support of its contention that he was acting on behalf of others, when participating in the bid, the only reasonable presumption that can be drawn is that assessee himself was doing business. In such a situation, assessee having failed to produce any books of accounts, in our opinion,AO was left with no choice but to make an estimate of income, based on value of purchases made by the assessee. Estimation of 3.5% was in our opinion reasonable. No doubt Assessing Officer has cited Section 69A of the Act while making the addition. However this by itself does not make the addition by estimating the income at 3.5% of the purchase turnover bad in law. Even dehorse the said Section, the addition was very much fair and in accordance with law. We do not find any reason to interfere with the order of the ld. Commissioner of Income Tax (Appeals). - Decided against assessee.

Summary

Issues:
- Addition made under Section 69A of the Income Tax Act
- Dispute regarding estimation of income and refund claimed
- Applicability of Section 69A in the case of the assessee
- Failure to produce evidence of acting on behalf of others in gold auction
- Justification of the 3.5% income estimation

Analysis:

1. The appellant challenged the addition of ?59,09,990 made under Section 69A of the Income Tax Act, contending that it was erroneous and not justified. The appellant argued that the provision of Section 69A should not have been applied to fix a higher income based on an estimated rate of return.

2. The appellant, engaged in the business of buying and selling old gold jewelry, disclosed an income of ?18,35,640 in the return for the relevant assessment year. The appellant claimed a refund of ?17,45,898 as tax collected at source on old gold purchased through jewelry auctions. However, the Assessing Officer found discrepancies in the appellant's explanation regarding acting as a commission agent and requested confirmation from the parties on whose behalf the appellant claimed to have acted.

3. Despite the appellant's claims of being a commission agent entitled to a small commission, the Assessing Officer estimated the business profit at 3.5% of the purchase turnover of ?23,32,17,428. The Assessing Officer made an addition of ?58,15,990 after deducting the income returned by the appellant. The Assessing Officer applied Section 69A to justify the addition, as the appellant failed to provide evidence and maintain proper books of accounts.

4. The Commissioner of Income Tax (Appeals) upheld the Assessing Officer's decision, emphasizing that the appellant's contradictory claims and failure to identify the parties on whose behalf he participated in auctions raised doubts about the appellant's activities. The Commissioner concluded that the addition based on the estimated income was reasonable and in accordance with the law.

5. The appellant's argument that Section 69A should not apply in the case of estimated profits for a gold commission agent was dismissed by the authorities. The lack of evidence supporting the appellant's claims of acting on behalf of others led to the conclusion that the appellant was conducting business independently, justifying the income estimation at 3.5% of the purchase turnover.

6. The Tribunal found no reason to interfere with the decision of the Commissioner of Income Tax (Appeals) and dismissed the appellant's appeal, affirming the addition made under Section 69A. The judgment highlighted the importance of maintaining proper records and providing substantiating evidence in tax assessments to avoid estimations and additions under relevant provisions of the Income Tax Act.