2022 (12) TMI 1215 - AT - Income Tax

Determination of undisclosed business turnover, arbitrary application of net profit rate at 8% - HELD THAT - As assessee has stated to be a commission agent for selling fish imported from M/s. Babul Enterprises of Bangladesh and copy of consignment agreement has also been filed before the ld. CIT(A). Assessee was to get commission at 1% of the sale value. Application of net profit rate at 8% on the total undisclosed business turnover would be excessive and higher, which will hit the assessee. We, therefore, in order to bring an end the controversy and also in the interest of justice and being fair to both the parties and also considering the fact that there was undisclosed sales prior to 1.8.2014, the assessee himself has offered the N.P rate at 2.03% on the disclosed turnover also, estimating the net profit @ 4% will meet the end of justice. Thus, the estimated net profit on undisclosed business turnover, will works out at Rs.50,56,562/- and the same stands confirmed and remaining addition stands deleted. Thus, ground nos. 2 to 5 are partly allowed. Addition for undisclosed interest - HELD THAT - We are of the considered view that since we have already estimated the business income of assessee for the year under consideration, we do not find any merit in the action of the ld. AO making the said addition. The same stands deleted. Ground no. 7 is allowed. Unexplained investment - HELD THAT - We find that in the undisclosed bank account held with Axis Bank the initial funding towards investment was made. Considering the returned income and additions confirmed by us we are of the view that assessee has sufficient creditworthiness to explain the source of Rs.49,999/- and therefore, no addition is called for. Thus, finding of the ld. CIT(A) is reversed and ground no.8 is allowed. Credit of tax, which has been deducted at source from the assessee - HELD THAT - We find merit in this ground of assessee and thus, restore this issue to the ld. AO, who shall examine the veracity of claim of assessee and if credit is not given for the tax deducted at source, the same should be allowed. Thus, ground no. 9 of assessee s appeal is allowed for statistical purpose. Not allowing proper opportunity of bearing heard - HELD THAT - We fail to find any merit in this submission of assessee as S/Shri Deb Roy Sudeb Roy appeared and filed written submissions/explanation, which has been duly considered by the ld. CIT(A). Therefore, there is no merit in ground no. 6 raised by the assessee.

Summary

Issues:
- Undisclosed business turnover determination
- Application of net profit rate at 8%
- Opportunity of being heard violation
- Addition for undisclosed interest income
- Addition for unexplained investment
- Credit for tax deducted at source
- Violation of principles of natural justice

Undisclosed Business Turnover Determination:
The appeal was filed against the order of the Ld. Commissioner of Income-tax (Appeals) for the assessment year 2015-16. The assessee challenged the arbitrary determination of undisclosed business turnover by the Income Tax Officer (AO) without proper justification. The AO added Rs. 12,64,14,049 as undisclosed turnover, applying an 8% net profit rate. However, the Tribunal found that Rs. 2,59,367 was part of disclosed bank accounts and had been considered in the income tax return. The Tribunal concluded that the undisclosed turnover remained at Rs. 12,64,14,049. The Tribunal noted that the application of an 8% net profit rate was excessive, especially considering the nature of the business as a commission agent for selling fish. The Tribunal adjusted the net profit rate to 4%, resulting in a confirmed addition of Rs. 50,56,562.

Opportunity of Being Heard Violation:
The appellant contended that the AO violated the principles of natural justice by not allowing a proper opportunity to be heard. However, the Tribunal found no merit in this submission as the appellant's representatives had appeared and submitted written explanations, which were duly considered by the Ld. CIT(A). Therefore, the Tribunal dismissed the appellant's grievance regarding the violation of the opportunity to be heard.

Addition for Undisclosed Interest Income and Unexplained Investment:
Regarding the addition for undisclosed interest income and unexplained investment, the Tribunal found that since the business income of the assessee had already been estimated, there was no merit in these additions. The Tribunal deleted the addition for undisclosed interest income of Rs. 32,226 and the unexplained investment of Rs. 49,999, as the appellant demonstrated sufficient creditworthiness to explain the source of the investment.

Credit for Tax Deducted at Source:
The appellant raised a grievance that the AO should have allowed credit for tax deducted at source from the appellant. The Tribunal found merit in this ground and directed the AO to examine the claim of the appellant regarding the tax deducted at source and allow the credit if not already given.

Violation of Principles of Natural Justice:
The appellant alleged a gross violation of the principles of natural justice. However, the Tribunal noted that similar issues had been raised and adjudicated upon earlier. Therefore, the Tribunal dismissed this ground as well.

In conclusion, the Tribunal partly allowed the appeal for statistical purposes, making adjustments to the undisclosed turnover determination, deleting certain additions, and directing the AO to examine the credit for tax deducted at source. The Tribunal addressed the issues raised by the appellant regarding the application of net profit rate, opportunity of being heard violation, and additions for undisclosed interest income and unexplained investment, providing a detailed analysis for each issue.