2018 (2) TMI 269 - AT - Income Tax

Rejection of books of accounts - N.P. rate determination - Held that - Assessee did not produce bills and vouchers in support of the books of account, therefore, same was rejected under section 145(3) of the I.T. Act which is also not in challenge before the Tribunal. Further, the assessee has made statement before A.O. that instead of proposed NP rate of 5%, NP rate of 2.50% may be applied for making the addition. It is well settled Law that addition made on admission of the assessee would not be subject to challenge in appeal. Since assessee agreed for addition by applying net profit rate of 2.50% as is applied in the case of her husband, therefore, there is nothing wrong in the orders of the authorities below in making and confirming the addition. Ground of appeal of assessee is dismissed. Unexplained deposit in the bank account - Addition on account of FDRs and interest on the said FDRs - Held that - Detailed information should have been obtained from the Bank as to who has opened this Bank Account with all the documents and all the documents should be confronted to the assessee. The statement of the Bank Manager should be recorded for verification of the facts along with KYC details available with the Bank. Similarly, as regards FDRs, the assessee explained that there may be a wrong information mentioning the name of Shri Ranjit Kumar Proprietor of M/s. Computer Junction because FDRs have been purchased out of cash available in the books of account of the assessee. The assessee obtained FDRs of ₹ 70 lakhs which includes ₹ 12.50 lakhs, which has also shown in the books of account of the assessee. Therefore, this fact should be verified from the cash book maintained by the assessee. In view of these facts, the matter requires reconsideration at the level of the A.O.

Summary

Issues involved:
1. Condonation of delay in filing appeal.
2. Challenge to addition in net profit calculation for computer business.
3. Addition of unexplained deposits in bank account and FDRs.

Issue 1: Condonation of delay in filing appeal:
The appellant filed an appeal which was considered time-barred by 4 days, but the appellant argued that the appeal was dispatched within the stipulated time. The appellant also filed for condonation of the delay, which was granted based on the explanation provided. The Tribunal accepted the appellant's reasoning and condoned the delay.

Issue 2: Challenge to addition in net profit calculation for computer business:
The appellant contested the addition of ?5,25,566 in net profit, arguing for the application of a lower interest rate based on a previous case. However, the CIT(A) rejected the argument due to lack of supporting documentation like bills and vouchers. The Tribunal upheld the decision, emphasizing that the appellant did not produce necessary evidence, leading to the rejection of the books of account under section 145(3) of the I.T. Act.

Issue 3: Addition of unexplained deposits in bank account and FDRs:
The AO made additions of ?89,000 for unexplained cash deposits and ?12,50,000 for FDRs, along with interest on the FDRs. The appellant challenged these additions, providing explanations regarding ownership of accounts and sources of funds. The CIT(A) upheld the AO's decision, prompting the Tribunal to set aside the orders for reconsideration. The Tribunal directed the AO to obtain detailed information from banks and verify the FDR details from the appellant's books, emphasizing the need for a thorough re-examination of the issues.

In conclusion, the Tribunal partially allowed the appeal for statistical purposes, highlighting the importance of proper documentation and verification in tax assessments. The case underscores the significance of providing detailed evidence and ensuring procedural fairness in tax matters.