2018 (3) TMI 888 - AT - Income Tax

Estimation of income @8% of purchase price - estimation of profit in respect of IMFL business carried by the assessee - Held that - As relying on Tangudu Jogisetty and Others Versus ITO 2016 (7) TMI 379 - ITAT VISAKHAPATNAM we direct the A.O. to re-compute the income of the assessee at 5% of purchase price. Accordingly, this ground of appeal raised by the assessee is partly allowed. Unexplained investment u/s 69 - assessee failed to establish the source of deposit, identity and genuineness of the creditor - Held that - During the appeal hearing before us also, the assessee failed to establish the source of credit, identity and credit worthiness of the creditor. Since the assessee failed to establish any of the requirements, we do not find any reason to interfere with the order of the Ld.CIT(A) and the same is upheld. - Decided against assessee.

Summary

Issues:
1. Estimation of income @8% of purchase price
2. Unexplained investment u/s 69 of I.T. Act

Estimation of income @8% of purchase price:
The appeal was filed against the order of the Commissioner of Income-Tax (Appeals) regarding the estimation of income at 8% of the purchase price for the assessment year 2011-12. The Assessing Officer (AO) had estimated the net profit at 20% of the stock put to sale due to the lack of proper records and details. The CIT(A) reduced the profit percentage to 8% and directed the AO to re-compute the income. The Tribunal considered a similar case where a profit margin of 5% was deemed reasonable for the IMFL business. The Tribunal directed the AO to estimate the profit at 5% of the purchase price, following the decision of the coordinate bench. Consequently, the income was to be re-computed at 5% of the purchase price, partially allowing the appeal raised by the assessee.

Unexplained investment u/s 69 of I.T. Act:
The AO found unexplained investments by the assessee and made an addition of ?8,50,165 as income from unexplained sources under section 69 of the I.T. Act. The CIT(A) confirmed the addition as the assessee failed to provide evidence regarding the source of the deposit and the genuineness of the creditor. The Tribunal upheld the CIT(A)'s decision as the assessee could not establish the source of credit, identity, and creditworthiness of the creditor. The Tribunal referred to various legal precedents and held that unless the assessee provides satisfactory evidence linking the amounts to disclosed sources, unexplained cash credits could be treated as income from undisclosed sources. Consequently, the appeal of the assessee on this ground was dismissed, and the addition of ?8,50,165 was confirmed.

In conclusion, the Tribunal partially allowed the appeal concerning the estimation of income at 5% of the purchase price while dismissing the appeal related to the unexplained investment under section 69 of the I.T. Act. The decision was pronounced on 9th March 2018.