2024 (3) TMI 1077 - AT - Income Tax

Estimation of profit - AO applying a profit rate of 20% on the contract receipt against the rate of profit declared by the appellant at 8.13% - CIT(A) directing the AO to apply a profit rate of 14.5% - HELD THAT -Assessee fairly admitted instead of 14% estimated by the Ld. CIT(A) if the estimation of 11% be made so as to give justice to the assessee as against the 8 % disclosed by the assessee and the same is generally also considered by the provision of section 44AD @ 8 % but considering the overall fact he prayed in the open court that if the profit is estimated @ 11 % which will end the justice. We deem it fit to estimate the profit @ 11 % in the interest of justice to the parties. Based on this observations ground no. 2 raised by the assessee is partly allowed. Addition of Unexplained creditors - HELD THAT - Considering the facts of the case that when the books of account of the assessee are rejected and the profit is estimated a separate addition arising out of that books of account cannot be made in the hands of the assessee.

Summary

Issues Involved:
1. Addition of unexplained cash credit u/s 68.
2. Application of Net Profit (NP) rate.
3. Addition of unexplained unsecured loans u/s 68.
4. Addition of other liabilities and provisions u/s 43B.
5. Addition of sundry creditors u/s 68.

Summary:

1. Addition of unexplained cash credit u/s 68:
The Assessing Officer (AO) added Rs. 1,07,92,593/- as unexplained cash credit u/s 68 due to non-submission of any explanation or documents by the assessee. The Commissioner of Income Tax (Appeals) [CIT(A)] noted that this addition was deleted by the AO in an order u/s 154 dated 29-03-2017, making this ground infructuous.

2. Application of Net Profit (NP) rate:
The AO applied a NP rate of 20% on total receipts of Rs. 11,66,37,877/- due to discrepancies in the assessee's expense claims. The CIT(A) reduced the NP rate to 14% based on past history and statutory deductions. The ITAT further reduced the NP rate to 11% considering the overall facts and the assessee's request for justice.

3. Addition of unexplained unsecured loans u/s 68:
The AO added Rs. 1,13,74,206/- as unexplained unsecured loans due to lack of proof of genuineness and creditworthiness. The CIT(A) noted that this addition was deleted by the AO in an order u/s 154 dated 29-03-2017, making this ground infructuous.

4. Addition of other liabilities and provisions u/s 43B:
The AO added Rs. 41,87,052/- as unexplained cash credit u/s 68 due to lack of proof of payment before the due date of filing the return. The CIT(A) sustained the addition to Rs. 14,920/- after verifying the details and evidences provided by the assessee, and the ITAT upheld this decision.

5. Addition of sundry creditors u/s 68:
The AO added Rs. 1,86,79,561/- as unexplained cash credit u/s 68 due to lack of details to prove the identity and creditworthiness of creditors. The CIT(A) reduced the addition to Rs. 16,39,926/- after verifying the details and evidences provided by the assessee. The ITAT upheld this decision, noting that once the books of account are rejected, separate additions cannot be made.

Conclusion:
The appeal of the assessee in ITA No. 299/Jodh/2018 was partly allowed, and the appeal of the Revenue in ITA No. 232/Jodh/2018 was dismissed. The ITAT pronounced the order in the open Court on 21/03/2024.