2018 (6) TMI 1234 - HC - Income Tax

Gross profit rate of 8% on construction activities - principle of peak balance on undisclosed receipts and payments - assessee engaged in trading of land, development and construction activities - Held that - Cash transactions concerning the assessee s construction business the Tribunal noted that not the entire receipt but the profit element suggested at the rate of 8% Gross Profit ratio should be taxed. Rent receipts Tribunal confirmed the additions in entirety in absence of any contrary evidence. Assessee s rotation of money for advances on interest Tribunal was of the opinion that only the peak credit and not the entire aggregate of the receipts could be taxed. This the Tribunal held by referring to the judgment of Division Bench of this Court in case of CIT v. Tirupati Construction Co. reported in (2014 (11) TMI 806 - GUJARAT HIGH COURT). No substantial questions of law.

Summary

Issues:
1. Application of gross profit rate on construction activities
2. Principle of peak balance on undisclosed receipts and payments
3. Substantial questions of law arising from Tribunal's judgment

Issue 1: Application of gross profit rate on construction activities
The case involved an appeal arising from a judgment of the Income Tax Appellate Tribunal. The Tribunal had made additions split into three parts: cash transactions related to construction business, rent receipts, and rotation of money for advances on interest. The Tribunal decided that only the profit element, suggested at an 8% Gross Profit ratio, should be taxed from the cash transactions concerning the assessee's construction business. Regarding rent receipts, the Tribunal confirmed the additions in entirety due to the absence of contrary evidence. In the case of rotation of money for advances on interest, the Tribunal held that only the peak credit, not the entire aggregate of receipts, could be taxed. This decision was supported by a judgment of the Division Bench of the Court in a previous case. The High Court, after examining the records and arguments, found no error in the Tribunal's decision and concluded that no substantial questions of law arose in this regard.

Issue 2: Principle of peak balance on undisclosed receipts and payments
The Tribunal's approach to taxing the peak credit instead of the entire aggregate of receipts in the case of rotation of money for advances on interest was upheld by the High Court. This principle was applied based on a previous judgment of the Division Bench of the Court. The Court found the Tribunal's interpretation of the law to be correct and in line with established precedents. Therefore, the Court dismissed any challenges to this aspect of the Tribunal's decision.

Issue 3: Substantial questions of law arising from Tribunal's judgment
The High Court determined that all the issues raised in the appeal were centered around the appreciation of materials on record by the Tribunal. After reviewing the facts and legal arguments, the Court concluded that the Tribunal had appropriately considered the evidence and made decisions based on the merits of the case. As a result, the Court held that there were no substantial questions of law arising from the Tribunal's judgment and proceeded to dismiss the Tax Appeals.

In conclusion, the High Court upheld the Tribunal's decision regarding the application of the gross profit rate on construction activities and the principle of peak balance on undisclosed receipts and payments. The Court found no errors in the Tribunal's reasoning and determined that no substantial questions of law were raised in the case.