2010 (6) TMI 905 - AT - Income Tax

Summary

The issues presented and considered in the legal judgment are as follows:1. Whether the delay of 53 days in filing the appeal can be condoned due to a reasonable cause.2. Whether an addition of Rs.9 lakhs under Section 68 of the Income Tax Act is justified for the assessment year 2005-06.3. Whether the estimation of profit at 8% of the gross receipt is reasonable and should be upheld.Issue 1: Delay in Filing AppealThe Appellate Tribunal considered the delay of 53 days in filing the appeal by the assessee. The assessee provided an Affidavit stating that they were away from Hyderabad during the relevant period, which prevented them from filing the appeal on time. The departmental representative argued that such a long delay cannot be condoned. The Tribunal held that the length of the delay is irrelevant for condonation; what matters is the reasonable cause for the delay. Since the assessee being away from Hyderabad was not disputed, the Tribunal concluded that there was a reasonable cause and thus condoned the delay, admitting the appeal.Issue 2: Addition under Section 68 of the Income Tax ActThe main issue was the addition of Rs.9 lakhs under Section 68 of the Income Tax Act. The assessee argued that as it was the first year of the firm and business had just started, there could not have been sufficient income for the undisclosed investment. The Tribunal referenced past judgments and held that even in the first year, the assessee is expected to explain cash credits. Without a satisfactory explanation, the deeming fiction under Section 68 applies. The Tribunal found no merit in the assessee's contentions, citing previous decisions, and confirmed the order of the CIT(A) regarding the addition.Issue 3: Estimation of Profit at 8%The assessee raised a ground regarding the estimation of profit at 8% of the gross receipt, but no arguments were presented by either side. The Tribunal reviewed the Lower Authority's order and deemed the 8% profit estimation to be reasonable, leading to no interference being necessary. Consequently, the Tribunal confirmed the Lower Authority's decision on this matter.Significant Holdings:- The Tribunal emphasized that the length of the delay in filing an appeal is irrelevant; what matters is the existence of a reasonable cause.- The Tribunal established that even in the first year of business, the assessee is expected to explain cash credits, and without a satisfactory explanation, additions can be made under Section 68 of the Income Tax Act.- The Tribunal upheld the Lower Authority's decision regarding the estimation of profit at 8% of the gross receipt.In conclusion, the Tribunal condoned the delay in filing the appeal, confirmed the addition under Section 68 of the Income Tax Act, and upheld the profit estimation at 8%. The appeal of the assessee was ultimately dismissed.