2020 (8) TMI 437 - AT - Income Tax

Estimation of income - trading addition - books of accounts rejected u/s 145(3) - net profit has been estimated @ 15% as against 14.23% declared by the assessee - HELD THAT - The books of accounts have rightly been rejected u/s 145(3) and thereafter, net profit has been estimated @ 15% as against 14.23% declared by the assessee. Nothing has been brought to our notice in terms of prior settled history of the assessee or comparative third party data. In the facts and circumstances of the case, we therefore upheld the order of the ld CIT(A) and the ground of appeal is hereby dismissed. Cash deposited in the bank account maintained with SBI, Tonk Road, Jaipur - whether the assessee has satisfactorily explained the nature and source of cash deposit of ₹ 25 lacs in his bank account maintained with SBI? - HELD THAT - Claim of the assessee of returning of the amount originally received from the buyers presupposes the previous understanding between the parties at the time of entering into the agreement and the terms of such understanding which therefore cannot be ignored. The claim of the assessee of returning the amount through cheque can be easily verified from the assessee s bank statement and the same cannot be manipulated, however, the same has not been verified either during the assessment or during the appellate stage. The affidavit of the buyer even though executed subsequent to the close of the assessment proceedings, however, where the transactions are reflected in the assessee s bank account, the same cannot be manipulated subsequently and can be easily verifiable directly from the Bank. During the course of hearing, the ld AR has also submitted that the assessee has been able to obtain the original sale agreement which could not be produced earlier as the same was with the buyers and has also submitted the source of repayments which also require proper verification. We therefore believe that the matter requires fresh examination taking into consideration the aforesaid aspects and the matter is accordingly set-aside to the file of the AO to examine the same a fresh after providing reasonable opportunity to the assessee. In the result, the ground is allowed for statistical purposes.

Summary

Issues Involved:

1. Validity of the order under section 143(3) of the Income Tax Act, 1961.
2. Sustenance of trading addition of ?1,31,984.
3. Addition of ?25,00,000 on account of unexplained cash deposits.
4. Charging of interest under sections 234A, 234B, and 234C of the Income Tax Act.

Detailed Analysis:

1. Validity of the Order under Section 143(3):

The assessee contended that the order dated 28.02.2014 was bad in law, invalid, and illegal due to lack of jurisdiction and being barred by limitation. However, this ground was deemed general in nature and did not require separate adjudication.

2. Sustenance of Trading Addition of ?1,31,984:

The assessee challenged the partial sustenance of the trading addition by the CIT(A), who had taken the turnover at ?12,00,000 and a net profit (N.P.) rate of 15% against the declared turnover of ?9,85,568 and N.P. rate of 14.23%. The Tribunal upheld the rejection of the books of accounts under section 145(3) and the estimation of net profit at 15%, as no prior settled history or comparative third-party data was provided by the assessee. The order of the CIT(A) was thus upheld, and the ground of appeal was dismissed.

3. Addition of ?25,00,000 on Account of Unexplained Cash Deposits:

The assessee contested the addition of ?25,00,000 made by the AO, claiming it was received as an advance against a sale agreement of land, which was later canceled, and the amount was returned to the buyer. The AO had issued a detailed show-cause notice and found the explanation unsatisfactory as the alleged purchasers did not appear for verification, and the immediate source of the cash deposit was not satisfactorily explained. The CIT(A) also upheld the addition, noting the lack of corroborative evidence and the failure to produce the buyers for examination.

The Tribunal, however, noted that the AO did not verify several crucial aspects, such as the ownership of the land, the financial capability of the buyers, and the source of the repayments. The Tribunal found that the claim of returning the amount through cheques could be verified from the bank statements and required proper verification. The matter was thus set aside to the AO for fresh examination, considering the new evidence and providing a reasonable opportunity to the assessee.

4. Charging of Interest under Sections 234A, 234B, and 234C:

The assessee denied liability for interest charged under sections 234A, 234B, and 234C, claiming it was contrary to the provisions of law and facts. However, no specific adjudication or detailed analysis was provided for this ground in the judgment.

Conclusion:

The appeal was partly allowed for statistical purposes, with the matter being remanded to the AO for fresh examination regarding the addition of ?25,00,000. The other grounds of appeal were dismissed or not separately adjudicated.