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2022 (10) TMI 123 - AT - Income TaxEstimation of income - bogus purchases - bogus purchases by applying the provisions of section 44AD - HELD THAT - CIT(A) has estimated the net profit at 8% as prescribed in section 44AD of the I.T. Act to be reasonable in the case of civil contractors. The justification given by the Ld.CIT(A) in deleting the said addition made on account of bogus purchase and also on the estimation of net profit @8% as per the provisions of section 44AD, is satisfactory. - Decided against revenue. Addition u/s 68 - unexplained cash credit (loan) - HELD THAT - As assessee has furnished required details to substantiate its claim pertaining to the addition made under section 68 - CIT(A) has also dealt with this issue extensively. On this note, we do not find any infirmity in the order of the Ld.CIT(A) in deleting the said addition made under section 68 of the I.T. Act. In the result, these grounds of appeal filed by the Revenue are dismissed. Addition u/s 14A r.w.r.8D - CIT-A restricted addition - Assessing Officer has made disallowance under section 14A r.w.r 8D(2) on the ground that the funds invested in the exempt income earning assets could not be segregated from the funds invested in the business of the assessee - HELD THAT - Upon perusal of the assessee s submission and the decisions cited by the Ld.AR, we are of the considered view that there is no fallacy in the decision of the Ld.CIT(A) in restricting the disallowance only to the extent of exempt income earned by the assessee. In this context, this ground of appeal filed by the Revenue is dismissed. Estimating 8% of alleged unsupported project expenses by treating the same as bogus expenditure - As we have already given a detailed order in the above mentioned appeals of the Revenue on this ground by confirming the said addition on the basis of 8% estimation relying on the decision of Rattan SinghRathod 2013 (1) TMI 133 - ITAT MUMBAI wherein the assessee s nature of business was also contracts and sub contracts, we are inclined to follow the decision and thereby the estimation of net profit rate @8%, in our view, is justifiable.
Issues Involved:
1. Deletion of addition on account of bogus purchases. 2. Deletion of addition under section 68 of the Income-tax Act. 3. Deletion of addition under section 14A read with Rule 8D of the Income-tax Act. 4. Confirmation of addition by estimating 8% of alleged unsupported project expenses. Detailed Analysis: 1. Deletion of Addition on Account of Bogus Purchases: The Revenue challenged the deletion of addition on account of bogus purchases, arguing that the assessee failed to prove business activity and relied on the statement of a director admitting the transactions were bogus. The Ld.CIT(A) restricted the addition to 8% of total bogus purchases, relying on a precedent case. The Tribunal upheld the Ld.CIT(A)'s decision, noting that the assessee provided sufficient documentation and evidence, including confirmation letters, bank details, and proof of repayment. The Tribunal found no infirmity in the Ld.CIT(A)'s order and dismissed the Revenue's appeal. 2. Deletion of Addition under Section 68 of the Income-tax Act: The Revenue contested the deletion of additions made under section 68, which pertained to share warrant money, advance receipts, and loans. The Ld.CIT(A) deleted these additions, noting that the assessee provided detailed evidence of repayments and that no incriminating material was found during the search. The Tribunal agreed with the Ld.CIT(A), emphasizing that the assessee had discharged its primary onus by providing identity, creditworthiness, and genuineness of the transactions. The Tribunal dismissed the Revenue's appeal, finding no fault in the Ld.CIT(A)'s extensive handling of the matter. 3. Deletion of Addition under Section 14A read with Rule 8D: The Revenue appealed against the deletion of additions under section 14A, arguing that the Ld.CIT(A) relied on a decision pending before the High Court. The Ld.CIT(A) restricted the disallowance to the extent of exempt income earned by the assessee, following the principle that disallowance under section 14A cannot exceed the exempt income. The Tribunal upheld the Ld.CIT(A)'s decision, noting that the assessee had provided sufficient details and that the Ld.CIT(A) had correctly applied judicial precedents. The Tribunal dismissed the Revenue's appeal. 4. Confirmation of Addition by Estimating 8% of Alleged Unsupported Project Expenses: The assessee appealed against the confirmation of addition by estimating 8% of alleged unsupported project expenses. The Ld.CIT(A) had restricted the estimated addition to 8%, relying on a precedent case involving similar circumstances. The Tribunal upheld the Ld.CIT(A)'s decision, agreeing that the estimation of net profit rate at 8% was justified given the nature of the business and the unreliability of the assessee's accounts. The Tribunal dismissed the assessee's appeal. Conclusion: The Tribunal dismissed the appeals filed by both the Revenue and the assessee, upholding the Ld.CIT(A)'s decisions on all contested issues. The Tribunal found that the Ld.CIT(A) had appropriately applied legal principles and judicial precedents in handling the additions and disallowances. The order was pronounced in the open court on 30th September 2022.
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