2019 (9) TMI 99 - AT - Income Tax

Addition regarding cash deposit made in the bank account - it is contended that, assessee had filed return of income u/s.44AD and deposit was made from the civil contract works and under this section the only profit u/s.44AD can be added - HELD THAT - If the assessee has offered income u/s.44AD he should separately shown in the computation of income that the profit has been earned from civil contract and it has been offered for taxation under the presumptive Section 44AD. The assessee has also not produced any details before us of the relevant part of the Income Tax Return in which there is a separate columns for the income offered u/s.44AD. The assessee is also unable substantiate with any external vouchers that the amount has been received from the contractee for civil contract works done. No any work order nor any receipts from the contractee has been produced by the assessee. The assessee is only to correlate with the receipts from the contractee as well as the deposit of some amount in the bank account. Ld. AR before us submitted that there was a profit of ₹ 2,16,932/- has been earned from the civil petty contract but he has deposited of ₹ 9,61,984/- in his bank account. The assessee could not establish the deposits in bank account that it has been received from the contractee with cogent materials. Therefore, keeping in view of the facts and circumstances of the case, we are of the opinion that the observations of the lower authorities in this regard are justified. This ground of appeal is dismissed. Addition u/s 68 - HELD THAT - The assessee has not proved the creditworthiness of the lenders in respect of total loan received by him. The letter sent by the Assessing Officer was also returned back which has not been made compliance before any of the authorities below. Keeping in view of the facts and circumstances of the case and considering the submissions of both the sides, we dismiss this ground of appeal of the assessee. Charging of interest u/s 234A 234B - HELD THAT - We find that the Hon ble jurisdictional High Court in the case of Ajay Prakash Verma Vs. ITO 2013 (1) TMI 140 - JHARKHAND HIGH COURT has held that the revenue can levy the interest only on the total income declared in the return of income and not on the income assessed and determined by the AO to that extent. We further notice that in case of Pr. CIT Vs. Haldia Petrochemicals Ltd., 2019 (8) TMI 938 - SC ORDER , in case of charging of interest u/s.234B 234C of the Act, the Hon ble Supreme Court has admitted the SLP of the Revenue. Since the decision of the Hon ble jurisdictional High Court prevails as on date, we allow this ground of appeal of the assessee and direct the AO to delete the interest levied u/s.234A 234B of the Act.

Issues Involved:
1. Legality of proceedings initiated under Section 147 and notice issued under Section 148 after four years.
2. Justification of addition of ?9,61,984/- representing total cash deposits in the bank account.
3. Justification of addition of ?11,10,000/- being unsecured loans.
4. Charging of interest under Sections 234A and 234B.
5. Additional ground regarding addition of ?2,43,236/- consisting of interest and maturity of FDs.

Issue-wise Detailed Analysis:

1. Legality of Proceedings under Section 147 and Notice under Section 148:
The assessee did not argue this ground before the Tribunal. Consequently, the ground challenging the reopening of the assessment under Sections 147/148 was dismissed as not pressed.

2. Addition of ?9,61,984/- Representing Total Cash Deposits:
The assessee argued that the deposits were from civil contract works and should be considered under Section 44AD, which allows for presumptive taxation. The Tribunal noted that the assessee had shown a turnover of ?21,69,320/- and offered 10% of this income under Section 44AD. However, the Tribunal observed that the assessee failed to substantiate the deposits with external evidence such as work orders or receipts from contractees. The Tribunal upheld the lower authorities' decision, stating that the assessee could not establish the source of the deposits. Therefore, the addition of ?9,61,984/- was confirmed.

3. Addition of ?11,10,000/- Being Unsecured Loans:
The assessee claimed that the unsecured loans were received through proper banking channels and provided confirmations. However, the Tribunal found discrepancies in the names and account details of the lenders. The assessee failed to prove the creditworthiness of the lenders, and the letters sent by the Assessing Officer were returned unserved. Consequently, the Tribunal upheld the addition of ?11,10,000/- as the assessee could not discharge the burden of proof under Section 68.

4. Charging of Interest under Sections 234A and 234B:
The Tribunal referred to the jurisdictional High Court's decision in Ajay Prakash Verma Vs. ITO, which held that interest under Sections 234A and 234B should be levied on the total income declared in the return and not on the assessed income. The Tribunal allowed this ground of appeal and directed the AO to delete the interest levied under Sections 234A and 234B.

5. Additional Ground Regarding Addition of ?2,43,236/- Consisting of Interest and Maturity of FDs:
The assessee submitted that the maturity value of FDs included the face value, which should not be considered as income. The Tribunal admitted this additional ground, following the Supreme Court's decision in National Thermal Power Corporation Ltd. The Tribunal remitted the matter to the Assessing Officer for verification, allowing the additional ground for statistical purposes.

Conclusion:
The appeal was partly allowed for statistical purposes. The Tribunal upheld the additions of ?9,61,984/- and ?11,10,000/-, allowed the appeal regarding interest under Sections 234A and 234B, and remitted the additional ground regarding FDs to the Assessing Officer for verification.

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