2019 (4) TMI 1910 - AT - Income Tax

Estimation of NP - assessee has filed return u/s 44AD - HELD THAT - Enhanced sales as upheld by the ld. CIT(A), a further credit of ₹ 10.00 lacs is required to be given and on the balance, the Assessing Officer is to estimate the profit. Looking to the nature of the assessee trade, estimation of net profit @ 6% as against N.P. disclosed by the assessee @ 4.43% will be reasonable without given any reason the Assessing Officer has applied NP rate of 8.33% which was offered by the assessee on the sales in the year ending on 31/3/2014. During the year under consideration the turnover of assessee has increased substantially which is possible at a sacrifice of some margin profit rate. There is no justification for applying the NP rate at 8.33% of earlier year wherein the assessee has filed return u/s 44AD. Accordingly the Assessing Officer is directed to recompute the addition by applying 6% NP rate on the turnover suggested by me hereinabove. Addition u/s 69 with respect to stock in trade and cash balance - HELD THAT - Assessee has not filed any details of such stock and cash in hand in its return of earlier year. By the impugned order, the ld. CIT(A) had given credit of ₹ 13,57,810/- by observing that the assessee had shown closing stock with the VAT return and the VAT department has accepted the return filed by the assessee wherein closing stock was shown at ₹ 13,57,810/-. There is no reason to give any further relief to the assessee in respect of closing stock. As found that the ld. CIT(A) has also accepted the cash balance. Accordingly, ground No. 2 raised by the assessee is dismissed.

Summary

Issues:
- Trading addition upheld by CIT(A)
- Addition made under section 69 of the Income Tax Act

Trading Addition Upheld by CIT(A):
The appellant, engaged in a retail business, filed a return disclosing a net profit rate of 4.43%. During assessment, it was found that the appellant had undisclosed bank accounts with substantial credits, leading to an enhanced turnover calculation. The Assessing Officer computed a net profit of 8.33% on the total turnover, resulting in an addition to the income. However, the CIT(A) partially allowed the appellant's claim by giving credit for cash deposits between bank accounts. The CIT(A) rejected the contention regarding cash deposits from old debtors due to lack of details. The tribunal directed the Assessing Officer to provide further credit of ?10.00 lakhs and apply a net profit rate of 6% instead of 8.33% on the enhanced turnover, considering the nature of the appellant's business and previous tax scheme filings.

Addition Made Under Section 69 of the Income Tax Act:
The Assessing Officer also made additions under section 69 for stock in trade and cash balance due to lack of details in the return of the earlier year. The CIT(A) allowed credit for closing stock and cash balance based on VAT return filings and acceptance by the VAT department. Consequently, the tribunal dismissed the appellant's appeal on this ground. Overall, the tribunal allowed the appeal in part, modifying the additions made by the Assessing Officer and CIT(A).

In conclusion, the tribunal's judgment addressed the trading addition upheld by the CIT(A) and the addition made under section 69 of the Income Tax Act. The tribunal provided detailed reasoning for modifying the additions, considering the nature of the appellant's business and the adequacy of information provided.