2023 (4) TMI 850 - AT - Income Tax

Undisclosed Deposits in bank account - AO treated the net amount as undisclosed business receipt - AO estimated the profit at 8% - HELD THAT - The estimation of profit is always involved a guess work. It can never be accurate but there must be some material justifying the guess work of the adjudicating authority. We are also facing the same problem because before us also, there is no detail. However, to some extent, the uniform rate of 8% available in Section 44AD applicable on some contractor is not to be applied on every time on every type of business. Therefore, we direct the ld. Assessing Officer to take an estimated income at 4% and credit of income disclosed by the assessee is to be given accordingly. Undisclosed contract receipt - Submission of the assessee is that as far as the different of Rs.5,00,000/- is concerned, it never came to his bank account, therefore, it was not recognized as a gross receipt on which profit is to be worked out. The revenue authority failed to find out any fault in this submission. They simply rejected. It is to be demonstrated from the details that the assessee has received the complete money and failed to offer income of the differential amount. Therefore, this fold of ground of appeal is allowed and the addition is deleted. CIT(Appeals) confirming the addition of commission income - non disclosure of full income in the return - AO has not brought any facts of the records. He has simply observed like this, the assessee has submitted that nothing such type of facts are reflected in TDS statement filed under section 226AS by the prayer. Therefore, there is no basis to make this addition, it is deleted.

Summary

Issues involved:
The judgment involves three main Issues:
1. Addition of undisclosed bank account deposits as undisclosed business receipt.
2. Addition of undisclosed contract receipt.
3. Addition of commission income not disclosed in the return.

Issue 1: Addition of undisclosed bank account deposits:
The assessee appealed against the addition of Rs.24,94,221 as undisclosed income, confirmed by the CIT(A). The deposits in the undisclosed bank accounts were explained as sale proceeds of fish. The AO estimated profit at 8%, resulting in the addition. The Tribunal found the AO's estimation lacking basis and directed to consider income at 4%, reducing the total addition to Rs.12,47,110.

Issue 2: Addition of undisclosed contract receipt:
The assessee contested the addition of Rs.60,000, which the CIT(A) upheld. Discrepancy in contract receipts was noted, and the AO calculated the addition based on a higher GP rate. The assessee argued that the differential amount not deposited in the bank should not be considered as gross receipt. The Tribunal allowed this ground, deleting the addition of Rs.60,000.

Issue 3: Addition of undisclosed commission income:
The AO added Rs.3,529 as commission income not disclosed in the return. The assessee refuted this, stating no such facts were reflected in the TDS statement. The Tribunal found no basis for the addition and deleted the amount.

In conclusion, the Tribunal partly allowed the appeal, directing adjustments in the additions made by the AO regarding undisclosed bank account deposits, contract receipts, and commission income. The interest levied under sections 234A, 234B, and 234C was also challenged by the assessee, being of a consequential nature.