2017 (8) TMI 654 - AT - Income Tax

Estimation of income - determination of N.P. - assessee is engaged in the business of (IMFL) liquor trade - Held that - The very same issue of estimation of profit in the trade of IMFL was considered by the coordinate bench of the Tribunal in the case of Tangudu Jogisetty 2016 (7) TMI 379 - ITAT VISAKHAPATNAM and held that estimation of 5% net profit on purchase is reasonable and directed the A.O. to estimate the net profit of 5% on total purchases net of all deductions Unexplained Loans and advances - Held that - The reason of the assessee that the confirmations could not be obtained due to the circumstances beyond the control is not acceptable and appears to be after thought. The time limit for completion of the assessment was 2 years from the end of the relevant assessment year and the assessee must submit the evidences within the time limit to support the claim. In this case, both the A.O. and the CIT(A) have given sufficient opportunities but the assessee failed to furnish the confirmations before the A.O./CIT(A). Hence, we hold that there is no reasonable cause for non-submission of the confirmations before the A.O. and the CIT(A), accordingly, the petition for admission of additional evidence is rejected. The assessee has not even furnished the names and addresses of the persons from whom advances were taken at the time of assessment proceedings as well as the CIT(A) and failed to establish identity, creditworthiness and the genuineness of the creditors. Therefore, the CIT(A) has rightly confirmed the addition made by the A.O. and the same is upheld. Unexplained investment - Held that - Though assessee claimed to have received the amounts from Shri Krishna Rao and Shri Krishna Murthy, the assessee has not even furnished the confirmation letters, addresses of the persons, PAN numbers and his creditworthiness of the creditors. Even at the time of appeal hearing, the assessee did not furnish any such details. Therefore, we do not find any infirmity in the order. The Ld. CIT(A) and the same is upheld.

Summary

Issues Involved:
1. Estimation of income for the assessment year 2011-12.
2. Unexplained investment of ?32,31,704.
3. Addition of ?5 lakhs on account of unexplained investment.

Estimation of Income:
The appeal was against the Commissioner of Income Tax (Appeals) order regarding the estimation of income for the assessment year 2011-12. The Assessing Officer estimated income at 20% on total sales, resulting in a net profit of ?41,42,987. The CIT(A) later restricted the net profit to 10% on total sales. The Tribunal considered similar cases and held that 5% net profit on purchases is reasonable. The Tribunal directed the Assessing Officer to estimate the net profit at 5% on total purchases net of all deductions. The Tribunal rejected the higher estimation by the A.O. and upheld the 5% estimation based on previous judgments.

Unexplained Investment of ?32,31,704:
The assessing officer found an unexplained investment of ?32,31,704 during the assessment proceedings. The assessee failed to explain the source of this amount adequately, leading to the addition of the same. The CIT(A) confirmed this addition based on relevant legal precedents. The assessee appealed, presenting confirmations from various parties to support the source of the investment. However, the Tribunal found the explanations provided unsatisfactory, as the confirmations were not submitted in time and lacked essential details. Consequently, the Tribunal upheld the addition of ?32,31,704 as unexplained investment.

Addition of ?5 Lakhs on Account of Unexplained Investment:
Another issue involved an addition of ?5 lakhs on account of unexplained investment received from two creditors. The assessing officer made this addition as the assessee failed to provide adequate evidence regarding the loans received. The CIT(A) confirmed this addition, and during the appeal, the assessee argued for the acceptance of the amounts received. However, the Tribunal found that the assessee did not furnish necessary details or evidence to support the loans received. As a result, the Tribunal upheld the addition of ?5 lakhs to the returned income.

In conclusion, the Tribunal partly allowed the assessee's appeal, maintaining the additions related to unexplained investments while adjusting the estimation of income based on the Tribunal's directions.