2017 (3) TMI 1875 - AT - Income Tax

Addition on account of suppressed sales calculated @ 30% of the disclosed receipts - HELD THAT - We find that if a net profit ratio of the gross on money is estimated by the AO is taken then it will meet the end of justice to both sides. Various Benches of the Tribunal had taken the net profit rate between 5 to 12%. Keeping in view of the ratios applied by various Benches of the Tribunals, we are of the view that if 8% net profit of the estimated on money is taken into consideration then it will meet the end of justice. Accordingly, we direct the AO to take 8% of the net profit of the gross on money estimated by him. Addition treating the expense on account of project as not genuine - HELD THAT - We do not find any infirmity in the findings of the ld CIT(A) for the reason that no evidence whatsoever has been filed in support of the claim of expenses. Therefore, we confirm the order of the ld CIT(A) in this respect.

Summary

Issues involved:
- Appeal against order of CIT(A) for assessment years 2004-05 & 05-06
- Dismissal of ground relating to order passed u/s 153A
- Addition of amounts for suppressed sales by AO
- Dispute over on money received by assessee
- Challenge to addition of project expenses
- Charging of interest u/s 234B & C
- Confirmation of project expense addition

Analysis:
1. Appeal against CIT(A) Order: Two appeals by assessee against CIT(A) order for assessment years 2004-05 & 05-06 were disposed of together.

2. Order u/s 153A: Ground challenging order u/s 153A was dismissed as not pressed for both years.

3. Addition for Suppressed Sales: AO made additions for suppressed sales of ?28,65,000/- and ?98,21,100/- for both years. Assessee, a partnership firm in real estate, faced scrutiny due to a search operation in related group entities.

4. On Money Dispute: AO added amounts as on money received by assessee based on statement of group member admitting on money practices. Assessee disputed the addition, citing lack of direct evidence and reliance on group's statements.

5. Project Expenses Challenge: Addition of ?80,861/- for disallowance of project expenses was made for AY 05-06. Assessee failed to produce supporting evidence, leading to confirmation of addition by CIT(A).

6. Interest u/s 234B & C: Consequential interest charges were directed to be given relief by AO.

7. Judgment on On Money: Tribunal held that while there was no direct evidence of on money received by assessee, a reasonable presumption based on group member's admission justified a partial addition. Net profit of on money estimated at 8% was directed to be taxed.

8. Precedent & Decisions: Tribunal cited various cases where net profit ratios of on money ranged from 5% to 12%, settling on 8% for the present case.

9. Confirmation of CIT(A) Order: Tribunal upheld CIT(A) decision on project expense addition, citing lack of supporting evidence by assessee.

10. Final Verdict: Appeals of assessee allowed in part, with directions on on money taxation and relief on interest charges. Project expense addition confirmed. Judgement pronounced on 31st March 2010.