2024 (3) TMI 251 - AT - Income Tax

Addition of contract receipts - Estimation of Profit / Income - bogus activity as assessee despite repeated opportunity could not justify the transactions - as noticed that apparently the said concern was paying commission of about 1% to unidentified brokers for arranging such transactions - assessee denied the allegation of receiving a contract - AO received the information that the contract price was Rs. 16,93,71,626/-, but he accepted the contract receipts of Rs. 29,65,16,795/- and estimated profit at 8% and made addition - CIT(A) deleted the addition HELD THAT - We fail to understand what was the contract receipts was it 29.65 crores or 16.93 crores? Further, when the MD of Totem Infrastructure Ltd. has stated that the commission ranges from 0.25% to 1%, then we fail to understand what is the basis for estimating the profit at 8%. In our considered view, the entire addition has been made on surmise and conjecture without there being any demonstrative evidence; therefore, the findings of the CIT(A) cannot be faulted with. Appeal of the Revenue is dismissed.

Summary

Issues involved: Appeal against CIT(A) order deleting addition made by AO regarding contract receipts.

Summary:

Issue 1: Addition of Rs. 2,37,21,344/- by AO

The appeal by the Revenue was against the CIT(A)'s order dated 16.08.2021 for A.Y. 2011-12, where the Revenue contended that the CIT(A) erred in deleting the addition of Rs. 2,37,21,344/-. The AO found that the assessee had shown contract receipts of Rs. 2,93,44,779/- and other income of Rs. 23,61,809/-. Information received from Addl. CIT, Hyderabad, indicated suspicious transactions involving Totem Infrastructure Ltd. The AO made the addition based on estimated profit at 8% due to discrepancies in contract details and commission payments. However, the Tribunal found the addition to be speculative without concrete evidence, questioning the basis for estimating profit at 8%. Consequently, the appeal of the Revenue was dismissed as the addition lacked demonstrative evidence.

This judgment highlights the importance of concrete evidence in making additions during assessment proceedings, emphasizing the need for a factual basis rather than speculation or conjecture.