2012 (10) TMI 124 - AT - Income Tax

Addition on account of cash credit u/s 68 AO issue notice u/s 133(6) Held that - As the assessee failed to file confirmation, identity and creditworthiness of lender. Therefore assessee unable to explaining the source of loan. ITAT is justified in confirming the addition - In favor of revenue Addition on account of source of loan not explained u/s 68 Assessee receive advance from lender AO issue notice u/s 133(6) Assessee explained the source of deposit as gift - Held that - As no documentary evidence was filed, assessee could not prove the identity and creditworthiness of the lender. Therefore it revealed that the assessee has been shifting the stand. Decision in favor of revenue. Addition on account of higher GP rate Assessee has two trading firms in two states Assessee failed to furnish quantitative details of stock - AO apply higher GP rate of one firm on other firm to compute its income - Assessee also filed GP rates & details of other comparable cases to CIT(A)- During remand report done by AO, assessee could not submit complete books of accounts, bills/vouchers CIT(A) apply GP rate of another firm of same city to assessee Held that - As assessee not submitted the full bills/vouchers. In that opinion of CIT(A) is justified. Appeal decided against assessee.

Summary

Issues:
1. Addition of Rs.18,000 in the name of Shri Vipin Kumar under section 68 of the Income Tax Act, 1961.
2. Addition of Rs.1,25,000 in the books of M/s. Vivek Enterprises in account of advance from Shri K.K. Gupta (H.U.F.) under section 68 of the Act.
3. Consideration of gross profit rate @ 7.59% in place of @ 5.59% in the unit of M/s. S.G. Enterprises.

Analysis:

Issue 1:
The first issue involves the addition of Rs.18,000 in the name of Shri Vipin Kumar under section 68 of the Income Tax Act, 1961. The Assessing Officer (AO) found cash credit entries from 14 persons, including Shri Vipin Kumar. While 13 persons confirmed the loan advanced to the assessee, Shri Vipin Kumar did not reply. The CIT(A) deleted the addition for 13 creditors but upheld it for Shri Vipin Kumar due to lack of proof of identity and creditworthiness. The ITAT agreed, stating that without confirmation and proof, the addition was justified.

Issue 2:
The second issue pertains to the addition of Rs.1,25,000 in the books of M/s. Vivek Enterprises from Shri K.K. Gupta under section 68 of the Act. The AO found discrepancies in proving the identity and creditworthiness of the creditor, leading to the addition. The CIT(A) upheld the addition as the assessee failed to provide documentary evidence. The ITAT concurred, noting the shifting stand of the assessee without substantial proof, justifying the addition.

Issue 3:
The final issue concerns the gross profit rate discrepancy in the units of Vivek Enterprises and S.G. Enterprises. The AO applied a higher rate due to inadequate documentation provided by the assessee. The CIT(A) upheld the estimation but considered it excessive, adjusting the rate based on comparable cases. The ITAT supported the CIT(A)'s decision, agreeing that the estimation of gross profit at 7.59% was justified given the circumstances and lack of complete documentation.

In conclusion, the ITAT dismissed the appeal filed by the assessee, upholding the decisions regarding all three issues. The judgment was delivered on 13th July, 2012, confirming the additions and gross profit rate adjustments made by the authorities.