2022 (6) TMI 454 - AT - Income Tax

Unaccounted income - undisclosed bank account maintained with Bank of Baroda - HELD THAT - No meaningful purpose will be served by sending the matter back to Assessing Officer for verification keeping in view that the matter was already remanded by the learned CIT(A) to the AO earlier and in his remand report the AO himself accepted the claim of the assessee of having incurred the expenditure through the undisclosed bank account keeping in view the nature and entries appearing therein as well as the nature and character of the assessee s business. In the said remand report, AO had also opined that it would be fair and reasonable to estimate the income of the assessee as reflected in the entries appearing in the undisclosed bank account maintained with Bank of Baroda by applying net profit rate of 10%. Now, in the audited income and expenditure account prepared and furnished by the assessee, the net profit as reflected in the transactions appearing in the undisclosed bank account is shown at around 20% and keeping in view all the facts of the case including the fact that expenditure was incurred by the assessee in cash which is not fully verifiable,it would be fair and reasonable to estimate the income of the assessee from the transactions as reflected in the undisclosed bank account maintained with Bank of Baroda at 25% of the gross receipt of Rs.30,53,371/-. The impugned order of the learned CIT(A) on this issue is accordingly modified and the Assessing Officer is directed to restrict the addition made on this issue to 25% - Appeal of the assessee is partly allowed.

Summary

Issues:
Addition of unaccounted income allegedly earned by the assessee as reflected in the undisclosed bank account maintained with Bank of Baroda.

Analysis:

Issue 1: Addition of Unaccounted Income
The assessee, a Civil Contractor, filed a return of income declaring Rs.5,54,910/-. During assessment, a discrepancy of Rs.20,06,800/- in total sales/receipts was noted. The Assessing Officer found Rs.30,53,371/- in an undisclosed bank account, treating it as undisclosed income. The assessee appealed, submitting additional evidence showing unaccounted sales/receipts and business expenses. The Assessing Officer suggested estimating profit at 10% of the undisclosed credit entries, but the CIT(A) disagreed, upholding the addition. The Tribunal considered audited income and expenditure details, revealing Rs.6,02,295/- as net income from the undisclosed bank account. The Tribunal modified the CIT(A)'s order, directing the addition to be restricted to 25% of Rs.30,53,371/-, considering various factors, including the nature of business and unverifiable cash expenditure.

Conclusion:
The Tribunal partially allowed the appeal, modifying the addition of unaccounted income made by the Assessing Officer and confirmed by the CIT(A) in the case of the assessee, a Civil Contractor, based on detailed analysis of the undisclosed bank account maintained with Bank of Baroda and the nature of business transactions, directing the Assessing Officer to restrict the addition to 25% of the undisclosed income amount.