2023 (6) TMI 281 - AT - Income Tax

Misc. income earned - estimation of 10% of the total Misc. receipts as normal business income and not as shipping income u/s. 115 VI - HELD THAT - There is no material available on record to hold that the misc. income earned by the assessee is also from the core activity of the shipping business. The misc. receipts generated on the activities carried out by the assessee on shore repairs of tugs with the help of qualifying ships, transport of bunkers, charter, etc. were not dredging activities which form the core activity of the assessee company as well as these activities could not be taken us incidental activity as prescribed in Rule 11 R of the Income Tax Rules. No other option than to confirm the order passed by the Ld. CIT(A) who has fairly estimated 10% of the misc. receipts as taxable income of the assessee. Thus the findings arrived by the Ld. CIT(A) does not require any interference and the ground raised by the Assessee is hereby rejected. Unexplained cash credit u/s. 68 - HELD THAT Here also the assessee has not provided any documentary evidence that the loan creditor is a NRI and the bank details of the NRI and repayment details by the assessee. Thus the assessee failed to prove the identity of the creditor itself, we have no hesitation in confirming the addition made by the CIT(A). The ground raised by the Assessee is devoid of merit and the same is dismissed.

Summary

Issues Involved:
The judgment involves cross appeals filed by the Assessee and the Revenue against the Appellate order dated 31.03.2010 passed by the Commissioner of Income Tax (Appeals)-II, Rajkot concerning the Assessment Year (A.Y) 2006-07.

Issue 1 - Treatment of Miscellaneous Receipts:
The Assessee, engaged in the business of shipping dredging & marine contracting, declared total income for AY 2006-07. The Assessing Officer questioned miscellaneous receipts exceeding the previous year's amount and their taxability under normal provisions. The Assessee contended that the receipts were earned from operating qualifying ships, but the AO disagreed, taxing them under normal provisions.

The Ld. CIT(A) partially allowed the appeal, estimating 10% of the misc. receipts as taxable net profit, considering lack of detailed expenditure information. The Assessee appealed this decision, arguing that the receipts should be treated as shipping income under section 115 V-I.

The Tribunal upheld the Ld. CIT(A)'s decision, emphasizing that the misc. receipts were not core or incidental activities as per Rule 11R, thus confirming the 10% estimation as taxable income. The Tribunal highlighted the importance of proving real income and the need to account for corresponding expenses, ultimately dismissing the Assessee's appeal on this ground.

Issue 2 - Addition of Unsecured Loan:
The Assessing Officer added an unsecured loan amount as unexplained income under section 68, as the Assessee failed to prove the identity, genuineness, and creditworthiness of the lender. The Assessee provided only the ledger copy, without further evidence like the lender's passport.

The Ld. CIT(A) upheld the addition, noting the lack of proof regarding the creditor's identity. The Assessee challenged this decision, but the Tribunal dismissed the appeal, emphasizing the necessity of proving the creditor's identity and affirming the addition under section 68.

In conclusion, the Tribunal dismissed the Assessee's appeal, upholding the Ld. CIT(A)'s decisions on both issues regarding the treatment of miscellaneous receipts and the addition of the unsecured loan.