2015 (3) TMI 647 - AT - Income Tax

Suppressed profit - AO in upholding addition that out of the total business activity carried on in the same premises, 50% belonging to the father and son respectively - CIT(Appeal) sustaining addition to the extent of 50% of the business - Held that - One of the contention of the assessee that he is engaged in the business of retail trade, and its total turn over did not exceed the prescribed monetary limit and AO ought to have computed profit @ 5% of total turn over as prescribed u/s 44AF of the Act but admittedly, the assessee has not claimed in return of income that it is entitled for the rate as prescribed u/s 44AF of the Act for computing the business profit. Therefore, at this stage, this contention of the Ld. Counsel for the assessee cannot be accepted and same is rejected. Another contention of the assessee is that there is no basis to attribute 50% of the profit to the assessee is devoid of any merit. It is not disputed by the assessee that he has been carrying out the business activity from the same premises. No evidence is placed on record proving the volume of business carried out by the assessee. The AO has given a categorical finding that no separate stock was maintained by the assessee and his father. It is contended that the addition has been made by the AO without considering the explanation offered by the assessee but is contrary to the records as it is admitted position that the assessee was not maintaining proper books of accounts, therefore the AO was justified in computing the profit on the basis of the material available before him. Hence, we see no reason to interfere in the order of Ld. CIT(A) same is hereby upheld. - Decided against assessee. Undisclosed debtors - AO had made addition on the basis that the assessee neither furnished list of sundry debtors as on 31.03.2008 nor could he explain the sundry debtors despite various opportunites - contention of the assessee is that everything was explained before the assessing officer and there was no undisclosed sundry debtors - Held that - After considering the totality of the facts that if the sales effected to these debtors has been included into the suppressed sales and addition made thereof. Therefore, it would not be open to the Revenue to make addition of same amount. This aspect requires verification by the Ld. AO, therefore this ground is restored to the file of AO for verification. The AO is hereby directed to verify whether sales effected to the debtors in question is included into the supported sales or not and profit on such sales is estimated or not. If AO finds that sales have been included he would delete the addition. - Decided in favour of assessee for statistical purposes. Unexplained cash - Held that - Ld. CIT(Appeal) observation that the amount could not be satisfactory explained at the time of survey cannot be sustained. In case, the assessee is able to demonstrate from the records that the amount so found during the course of survey was in fact collection made in respect of sales. The assessee has pointed out that in the impounded material collected during the course of survey itself the assessee has shown that the cash so found was out of the sales collections. This fact requires to be verified at the hands of the assessing officer. Therefore, the issue is restored to the file of AO for verification, whether the cash found during the course of survey was collection of the sale amount. In case, the amount pertains to sale collection same be deleted.- Decided in favour of assessee for statistical purposes. Unaccounted deposits / gifts - assessee submitted that no addition can be made in the assessment year under consideration since these deposits / gifts pertain to the assessment year 2007- 2008 - Held that - CIT(Appeal) has observed that the gift given by father is not proved and observed that the total gifts far exceeded the income shown by the donor and thus cannot be held to be explained. It was incumbent upon the assessee to produce the relevant documentary evidence in support of its claim. The assessee is required to furnish the evidence to prove genuineness of the transaction and creditworthiness of the donors. The authorities below have given a finding on fact that the donors were not having sufficient fund to give gifts to the assessee. This finding on fact is not rebutted by the assessee by placing any contray material on record. Therefore, we do not see any reason to interfere into finding of the Ld. CIT(Appeal) to this extent. However, the contention of the Ld. Counsel for the assessee is that these gifts / balances pertain to earlier year i.e. assessment year 2007-08. This fact requires verification at the end of the assessing officer. - Decided in favour of assessee for statistical purposes. Unaccounted transfer in the bank account - Held that - revenue has not placed anything on record suggesting that the amount deposited by Raj Bahadur Chand in fact belonged to the assessee. On the contrary, the assessee has produced evidences in the form of bank statement etc., therefore, we hereby direct the assessing officer to delete the addition. - Decided in favour of assessee. Discrepancy in balance sheet - CIT(A) allowing relief of ₹ 2,75,OOO/- to the assessee out of addition of ₹ 5,25,000/- - Held that - this amount is treated as explained in part only. It is seen that vide report dated 26.09.2011 (which has been rebutted by the ld. AR) it has been mentioned that the gift amount of ₹ 2,50,000/- shown received from father does not stand proved since there is a finding that Shri Ganesh Shanker Punetha s total income for the year was ₹ 2,30,884/- and he is shown to have even gifted an amount of Rs, 270,000/- to the wife of the appellant in this very year. Thus the sum total of gifts far exceeds the income shown in the return and thus cannot be held to be explained. Thus, out of ₹ 5,25,000/-, ₹ 2,75,000/- (i.e. 5,25,000 - 2,50,000 2,75,000) is held as explained and the addition to this extent deleted. The remaining amount of ₹ 2,50,000/- is upheld as an addition. Thus finding on fact by the Ld. CIT(Appeal) is not controverted by the revenue by placing any contrary material on record. - Decided against revenue. Addition on account of benami transactions - CIT(A) deleted the addition - Held that - CIT(Appeal) has given a finding that no action is taken against the recorded bank Account holder, no inquiry was made by the assessing officer to find out involvement of the appellant. The Ld. CIT(Appeal) has given a finding that the assessee was merely an introducer of bank account. However, it is transpired from the assessment order the Assessing Officer has observed that according to material available on records there were certain deposits in account no. 10925759010. Thus we are not able to accept the argument that the assessee was merely an introduced of the account if he was merely introduces of the account then how the details related to the account of third party was found during the course of survey at his premises. Therefore, we hereby set aside this issue to the file of the assessing officer as to give a clear finding in respect of addition made what was the basis and material available before him for making such addition. - Decided in favour of revenue for statistical purposes.

Summary

Issues Involved:
1. Confirmation of addition on account of suppressed profit.
2. Confirmation of addition under Section 40A(3) of the Income Tax Act.
3. Confirmation of addition of undisclosed sundry debtors.
4. Confirmation of addition of cash found during survey.
5. Confirmation of addition on the ground that the donor did not have sufficient income.
6. Confirmation of addition on the ground that the assessee has not been able to prove the genuineness of the transaction.
7. Confirmation of addition on the ground that the assessee has not been able to prove the creditworthiness of the person confirming the transaction.
8. Reassessment framed without providing opportunity to the appellant.

Detailed Analysis:

1. Confirmation of Addition on Account of Suppressed Profit:
The first issue pertains to the confirmation of the addition of Rs. 2,56,601/- made on account of suppressed profit as per impounded material. The assessee argued that he was only assisting his father, who was ill during the survey, and that the net profit declared by both father and son was much above the presumed rate of 5% under Section 44AF of the Act. However, the Tribunal found that the assessee did not maintain proper books of accounts, justifying the AO's computation of profit based on available material. The Tribunal upheld the CIT(A)'s order, dismissing the assessee's appeal on this ground.

2. Confirmation of Addition under Section 40A(3):
The assessee did not press this ground during the hearing, leading to its dismissal as not pressed.

3. Confirmation of Addition of Undisclosed Sundry Debtors:
The third issue involved the confirmation of the addition of Rs. 4,01,112/- as undisclosed sundry debtors. The Tribunal noted that the AO made the addition because the assessee neither furnished a list of sundry debtors nor explained them despite opportunities. The Tribunal found that if sales to these debtors were included in suppressed sales and profit estimated, it would not be open to the Revenue to make the same addition. This aspect required verification by the AO, and the issue was restored to the AO for verification.

4. Confirmation of Addition of Cash Found During Survey:
The fourth issue was the confirmation of the addition of Rs. 1,60,273/- as cash found during the survey. The Tribunal found that the cash was explained as sales collections in the impounded material. This fact required verification by the AO, and the issue was restored to the AO for verification.

5. Confirmation of Addition on the Ground that the Donor Did Not Have Sufficient Income:
The fifth issue involved the confirmation of the addition of Rs. 2,50,000/- on the ground that the donor did not have sufficient income. The Tribunal found that the CIT(A) observed that the gifts exceeded the donor's income and thus could not be held as explained. However, the Tribunal directed the AO to verify if these deposits/gifts pertained to an earlier year and to delete the addition if they did.

6. Confirmation of Addition on the Ground that the Assessee Has Not Been Able to Prove the Genuineness of the Transaction:
The sixth issue was the confirmation of the addition of Rs. 1,60,000/-. The Tribunal found that the assessee produced evidence that the amount belonged to Shri Raj Bahadur Chand, who confirmed the same. The Tribunal directed the AO to delete the addition, as the Revenue did not prove that the amount belonged to the assessee.

7. Confirmation of Addition on the Ground that the Assessee Has Not Been Able to Prove the Creditworthiness of the Person Confirming the Transaction:
The seventh issue was not pressed by the assessee during the hearing, leading to its dismissal as not pressed.

8. Reassessment Framed Without Providing Opportunity to the Appellant:
The Tribunal found that no arguments were addressed or submissions made regarding this ground, leading to its rejection.

Revenue's Appeal:

1. Apportionment of Business Turnover:
The Tribunal upheld the CIT(A)'s order that only 50% of the business turnover belonged to the assessee, rejecting the Revenue's appeal on this ground.

2. Allowance of Relief of Rs. 2,75,000/-:
The Tribunal upheld the CIT(A)'s finding that Rs. 2,75,000/- was explained and deleted the addition, rejecting the Revenue's appeal on this ground.

3. Deletion of Addition of Rs. 8,70,000/- on Account of Benami Transactions:
The Tribunal found that the AO did not provide a clear basis for the addition and set aside the issue to the AO for a clear finding on the material available for making such an addition. This ground was allowed for statistical purposes.

Conclusion:
The appeals were partly allowed for statistical purposes, with some issues restored to the AO for verification and others upheld or dismissed based on the findings. The Tribunal's detailed analysis ensured that each issue was addressed comprehensively, maintaining the integrity of the legal process.