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2018 (10) TMI 435 - AT - Income TaxEstimation of income - @ 11% on total sales OR @12.5% on sales - separate addition of unaccounted sales or suppressed receipts - whether the CIT(A) is right in including the total turnover instead of separate addition? - Held that - The assessee has not maintained the books of accounts and did not produce the books of accounts before the AO. Though the assessee had admitted the income of ₹ 1.00 during the survey, the revenue did not establish with relevant material that the income admitted by the assessee was additional income over and above the normal profits with evidence. Though the turnover as per Profit and loss account was ₹ 12,61,34,334/- , the assessee increased the turnover with a sum of ₹ 99,65,600/- to compensate the deficiencies of survey and filed the return of income. Otherwise the return would have resulted in lesser income to that extent. Neither the revenue nor the assessee could place the material relating to the expenditure claimed with regard to the unaccounted receipts. The revenue did not bring any material to establish that there was no expenditure incurred by the assessee relating to the unaccounted receipts. In the absence of the books of accounts it is unascertainable whether the assessee had booked the entire expenditure relating to accounted and unaccounted receipts. In the absence of any specific material with regard to the expenditure relating to unaccounted receipts, we hold that it is judicious to estimate the income on total receipts inclusive of unaccounted sales instead of making separate addition. The returned income of ₹ 1,00,93,430/- was after admission of additional income of ₹ 99,65,600/-, but not the original income as per Profit & Loss account found during the course of survey. Therefore, we hold the Ld.CIT(A) has rightly deleted the separate addition. For estimation of income @12.5% and scaled down @11% byCIT-A - Held that - In this case no books of accounts were produced and the evidences were found in the premises of the assessee showing the unaccounted sales. The assessee could not prove the expenditure incurred with relevant books and the vouchers. Therefore, we hold that the estimation of income @11% is reasonable and decline to interfere with the order of the Ld.CIT(A) Penalty levied u/s 271D - Unaccounted cash - survey proceedings - whether cash received was towards the share capital or the loan as accepted due to immediate financial requirements thus there is reasonable cause for accepting the loan - Held that - The sums received by the assessee was the loan but not towards common project or syndicate. No tangible evidence has been furnished by the assessee in the form of bank account or the project reports and the promotion of common business venture in respect of the amounts received by the assessee during the year under consideration. Therefore, we hold that the said sums were nothing but the loans accepted by the assessee otherwise than in cash. Even the Ld.CIT(A) also did not accept the theory of share capital which was not controverted by the assessee. Therefore, we have no hesitation to hold that the sum of ₹ 68,48,000/- was nothing but a loan accepted by the assessee in contravention to the provisions of section 269SS of the Act and attracts the penalty u/s 271 of the Act. Sum received towards sale of flats - Held that - In the instant case, during the financial year 2007-08, the assessee had received a sum of ₹ 68,48,000/- which are held to be loans but not the share capital or the capital contribution. Therefore, we hold that the Ld.CIT(A) erred in deleting the penalty of ₹ 37,45,000/- representing the sale of flats to the assessee and we are unable to accept the contention of the Ld.CIT(A) and accordingly we set aside the order of the Ld.CIT(A) and confirm the penalty levied by the Addl.CIT. In respect of the loan taken from Sri TSVG Naga Prasad it was mentioned on the face of in receipt in page No.51 that the amount was received for construction of the flat or house. The same fact was recorded in the sale deed. Therefore, we do not find any infirmity in the Ld.CIT(A) order and the same is upheld. Addition u/s 68 - Held that - There is no doubt that the loan of ₹ 17,76,000/- related to the earlier year, but not related to the year under consideration. The AO made the addition u/s 68 of the Act and as per the provisions of section 68 of the Act, the credits made during the year under consideration for which the source is not explained required to be brought to tax. Since the credit is related to the earlier assessment year, there is no case for making the addition in the year under consideration. Accordingly, we do not find any infirmity in the order of the Ld.CIT(A) and the same is upheld. The appeal of the revenue on this ground is dismissed.
Issues Involved:
1. Estimation of income based on sales. 2. Separate addition of unaccounted receipts. 3. Validity of notice issued under section 148. 4. Penalty under section 271D for accepting cash loans. 5. Penalty under section 271E for repayment of loans in cash. Issue-wise Detailed Analysis: 1. Estimation of Income Based on Sales: The assessee, involved in civil construction, was subject to a survey under section 133A, which revealed unaccounted income. The Assessing Officer (AO) estimated income at 12.5% of gross sales, while the Commissioner of Income Tax (Appeals) [CIT(A)] reduced it to 11%. The Tribunal upheld the CIT(A)’s estimation, considering it reasonable based on comparable cases and the absence of books of accounts. The Tribunal found the estimation of 11% on the total turnover of ?13,84,64,334/- appropriate, dismissing the revenue’s appeal for a higher estimation and the assessee’s cross-appeal for a lower estimation. 2. Separate Addition of Unaccounted Receipts: The AO made a separate addition of ?1,23,30,000/- for unaccounted receipts found during the survey. The CIT(A) included this amount in the total turnover and estimated the income on the combined turnover. The Tribunal agreed with the CIT(A), stating that the unaccounted receipts should be part of the total turnover for income estimation rather than a separate addition. The Tribunal dismissed the revenue’s appeal for a separate addition and allowed the assessee’s cross-objection on this point. 3. Validity of Notice Issued Under Section 148: The assessee challenged the notice issued under section 148, claiming it was invalid. The CIT(A) upheld the notice, and the Tribunal confirmed this decision, stating that the notice was based on material found during the survey, and the assessee failed to provide evidence to prove it was invalid. The assessee’s appeal on this ground was dismissed. 4. Penalty Under Section 271D for Accepting Cash Loans: The assessee received cash loans from two individuals, leading to penalties under section 271D. The CIT(A) partly upheld the penalties, confirming ?31,03,000/- from one individual while deleting the penalty for another. The Tribunal confirmed the penalty of ?31,03,000/- and reinstated the deleted penalty, totaling ?67,19,000/-, as the assessee failed to provide evidence of the loans being capital contributions or for specific projects. The Tribunal dismissed the assessee’s cross-appeal and upheld the revenue’s appeal on this matter. 5. Penalty Under Section 271E for Repayment of Loans in Cash: The assessee repaid loans in cash, leading to penalties under section 271E. The CIT(A) deleted penalties for some repayments, considering them as interest payments, while confirming others. The Tribunal upheld the deletion of penalties for interest payments, citing that section 269T does not apply to interest payments, but confirmed penalties for other repayments. The Tribunal dismissed the revenue’s appeal for penalties on interest payments and the assessee’s cross-objection for confirmed penalties. Conclusion: The Tribunal upheld the CIT(A)’s decisions on the estimation of income at 11%, inclusion of unaccounted receipts in total turnover, and the validity of notice under section 148. It confirmed penalties under section 271D for accepting cash loans and partly upheld penalties under section 271E for repaying loans in cash, dismissing the appeals and cross-objections accordingly.
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