2015 (1) TMI 786 - AT - Income Tax

Application of Net profit rate of 5% on estimated turnover of ₹ 90,00,000/- - Held that - It is not in dispute that payment of ₹ 84,18,580/- was made for purchase of trading goods. The Authorized Representative of the assessee could not bring any material before us to show that any trading goods so purchased remained unsold at the end of the relevant year. The assessee s turnover also includes the business expenditure and profit of the assessee, besides the purchases. The assessee was not able to bring any material before us to show the amount of its other business expenses and the amount of gross profit earned by it. Thus, we find no infirmity in the order of the CIT(A) in estimating assessee s turnover at ₹ 90,00,000/- which was most reasonable in the facts and circumstances of the case. The contention of the assessee that purchases of ₹ 13,73,600/- was shown by his wife in her Return of Income merits no interference with the finding of the CIT(A) as the assessee miserably failed to bring on record any material to show that payments were made from his credit card in respect of purchases made by his wife and in absence of any material to show how and when such repayments were made by his wife to him. - Decided against assessee. Addition on investment as peak deposit - Held that - The assessee has brought no material before us to show that there was any error in the finding of the CIT(A) that the assessee made peak deposit of ₹ 5,26,869/- on 19.11.2007. Further, the assessee has brought no material to explain the source of the said peak deposit.- Decided against assessee. Unexplained credit card expenditure - purchase of trading goods - CIT(A) deleted the addition - Held that - No material was brought on record by the Revenue after making necessary enquiries to show that payments from credit card was not made for purchase of trading goods, but was made for any personal expenses cannot be brushed aside simply on the basis of surmises and conjectures and without bringing on record material to controvert the explanation of the assessee. In absence of any material brought before us to show that the explanation of the assessee was not plausible, we find no good reason to interfere with the order of the CIT(A). - Decided against Revenue.

Issues Involved:

1. Confirmation of addition of Rs. 2,99,800/- by applying a net profit rate of 5% on an estimated turnover of Rs. 90,00,000/-.
2. Confirmation of addition of Rs. 5,26,869/- as peak deposit investment.
3. Deletion of addition of Rs. 33,72,883/- on account of payment made for credit card expenses under Section 69C of the I.T. Act.

Issue-wise Detailed Analysis:

1. Confirmation of Addition of Rs. 2,99,800/- by Applying a Net Profit Rate of 5% on Estimated Turnover of Rs. 90,00,000/-:

The assessee contended that the Commissioner of Income-tax (Appeals) [CIT(A)] erred in confirming the addition of Rs. 2,99,800/- by estimating the turnover at Rs. 90,00,000/-. The assessee argued that the purchases for his retail business amounted to Rs. 28,78,800/- only, making the estimated turnover unjustified. However, the CIT(A) found that the assessee was engaged in retail trading and had made total purchases of Rs. 84,18,580/- through multiple credit cards. The CIT(A) estimated the turnover at Rs. 90,00,000/- and applied a net profit rate of 5%, resulting in an estimated income of Rs. 4,50,000/-. After allowing credit for the declared profit of Rs. 1,50,200/-, the addition of Rs. 2,99,800/- was confirmed. The tribunal found no infirmity in the CIT(A)'s estimation and upheld the addition.

2. Confirmation of Addition of Rs. 5,26,869/- as Peak Deposit Investment:

The CIT(A) observed peak deposits in the assessee's accounts amounting to Rs. 5,26,869/- on 19.11.2007. The assessee failed to provide any cogent evidence to explain the source of these deposits. Consequently, the CIT(A) confirmed the addition as unexplained investment. The tribunal noted that the assessee did not bring any material to challenge the CIT(A)'s findings or to explain the source of the peak deposit. Therefore, the tribunal upheld the addition of Rs. 5,26,869/-.

3. Deletion of Addition of Rs. 33,72,883/- on Account of Payment Made for Credit Card Expenses under Section 69C of the I.T. Act:

The Assessing Officer (AO) added Rs. 41,99,552/- to the assessee's income under Section 69C, treating the credit card payments as unexplained expenditure. The assessee claimed that the payments were for business purchases, including purchases made by his wife. The CIT(A) found that the assessee made total payments of Rs. 84,18,580/- through six credit cards and estimated the turnover at Rs. 90,00,000/-. After confirming additions of Rs. 2,99,800/- and Rs. 5,26,869/-, the CIT(A) deleted the balance addition of Rs. 33,72,883/-. The tribunal noted that the AO did not produce any evidence to show that the credit card payments were not for trading goods. The tribunal found no reason to interfere with the CIT(A)'s decision and dismissed the Revenue's appeal.

Conclusion:

Both the assessee's and the Revenue's appeals were dismissed. The tribunal upheld the CIT(A)'s order confirming additions of Rs. 2,99,800/- and Rs. 5,26,869/- and deleting the addition of Rs. 33,72,883/-. The tribunal found the CIT(A)'s estimations and conclusions reasonable and supported by the evidence on record. The judgment maintained the legal principles and upheld the findings based on the presented facts and evidence.

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