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TMI Blog2012 (9) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... m-P&L Account found at the time of survey was only projected and the word “projected” was clearly inscribed on it assessment based on projected turnover need to be rejected - once turnover is available as per audited accounts, income has to be estimated on a reasonable basis based on turnover as labour charges and purchases are not verifiable in the absence of books of accounts which have not been produced - estimation can not be made @8% under section 44AD which is applicable only in case of turnover not exceeding Rs.40.00 lacs and in the present case, turnover is Rs.2.80 crores - As the books of account for this year are not available and, therefore labour charges and purchases can not be cross verified and no comparative case for the current period has been brought to notice it would be reasonable to estimate net profit @ 6% this year - partly in favour of assessee. Allowability of expenses against royalty income by CIT(A) - income from lease of hotel - revenue appeal - Held that:- The hotel building had been leased out along with furniture, fittings etc. for running the hotel. Therefore, income has been rightly assessed as income from other sources. No infirmity in the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The payment pertaining to this year was Rs.8.5 lacs. The assessee during the assessment proceedings for this year filed letter from Shri B.K. Sheena in which it was confirmed that he had given a loan of Rs.5.00 lacs during 20th April 1998 to 23rd April 1998 to the assessee. In the said letter he also explained that the source of loan was sale proceeds of shop Nos. 13-22 sold by the assessee. Shri B.K. Sheena also gave his Permanent Account number (P.A. No.). The AO however, observed that no agreement for sale of shop was produced during the assessment proceedings for assessment year 1998-99 or during this year. No proof of cash payment was also given nor there were entries in this regard in the books of account. The AO also observed that though loan is claimed to have been taken in April 98, the payment aggregating to Rs.8.5 lacs had been made in July 98 and October 98. The AO therefore, did not accept the claim that the assessee had taken loan in April 98 for payment to be made in July and October 98. The AO thus, did not accept the genuineness of the claim of loan taken from Shri B.K. Sheena and added the sum of Rs.5.00 lacs. In regard to the balance amount, the assessee submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of Rs.5.00 lacs, we find that the assessee had explained the same as cash loans taken from Shri B.K. Sheena during April, 1998, which has also been confirmed by him giving his Permanent Account Number. The AO had made addition on the ground that the cash payments had been made long after the claim of receipt of loan. In our view, only on the ground that cash was kept and payments were made much later addition cannot be justified in the absence of any material to show that cash loans had been utilized elsewhere. The assessee had filed confirmation of loan giving Permanent Account Number and, therefore, this could have been verified by AO from assessment records. In case, loans were reflected in the assessment records of Shri B.K. Sheena and source had been explained, addition could not have been made only on the ground that Shri B.K. Sheena had not been produced. In our view, the claim of loan of Rs.5.00 lacs requires fresh verification. We, therefore, set aside the order of CIT(A) on this point and restore the issue to the file of AO for passing a fresh order after necessary verification and after allowing opportunity of hearing to the assessee. 3. ITA No.5301/Mum/2006 (App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the additional income disclosed at the time of survey was conditional as was clear from ques.No.20. The assessee had subsequently retracted from the statement vide letter dated 8.1.2003 as there was no discrepancy. The assessee pointed out that the books of accounts were audited and based on which he had originally filed the return of income at Rs.16,85,533/- The assessee also submitted that the documents found at the time of survey gave only projected figures as the word projected was clearly inscribed on it. It was also pointed out that in assessment year 1998-99 also, AO made additions based on projected figures. The Tribunal vide order dated 30.3.2005 had not upheld such addition. CIT(A) agreed that in view of the decision of the Tribunal in 1998-99, income could not be computed on the basis of projected turnover. It was noted by him that the assessee as per P L Account filed with the return of income had declared turnover of Rs.2,80,04,290/- and net profit of Rs.12,46,507/- as profit of the proprietary concern Techno Mech Engineers. CIT(A), therefore, held that net profit had to be estimated on the basis of turnover declared as per audited accounts. CIT(A) also noted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee in response to Ques.No.19 at the time of survey had declared additional income of Rs.30.00 lacs over and above the normal profit for discrepancy in labour charges and purchases for assessment year 2003-04. The AO therefore made an addition of Rs.30.00 lacs based on such statement. The AO also estimated profit on the basis of the projected turnover @ 8% and made addition of Rs.98,59,200/-. This was in addition to Rs.30.00 lacs added on the basis of statement during survey. The case of the assessee is that the trading-cum-P L Account found at the time of survey was only projected and the word projected was clearly inscribed on it. The books of account were actually audited as per which the turnover was Rs.2.80 crore and net profit was Rs.12.46 lacs which has to be accepted. Soon after survey, assessee vide letter dated 8.1.2003 had also retracted from the disclosure of Rs.30.00 lacs as there was no actual discrepancy. 3.2.5 The issue of assessment of income on the basis of projected turnover had been considered by the Tribunal in 1998- 99 in which the Tribunal did not accept the assessment on the basis of project turnover. Following the said decision of the Tribunal, C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort the net profit rate declared. Considering the facts and circumstances of the case, in our view, it would be reasonable to estimate net profit @ 6% this year. We hold accordingly. 4. The second ground raised in the appeal by the revenue is regarding allowability of expenses against royalty income. The assessee had declared receipt of royalty of Rs.3,60,000/- from Hotel Golden Bin which was declared as income from other sources against which expenses totaling to Rs.1.50 lacs had claimed on account of property tax, maintenance charges and collection charges. The AO however, treated the income as income from house property and allowed deduction of only Rs.1,08,000/- under section 24(a) and accordingly taxed income from house property at Rs.2,52,000/-. 4.1 The assessee disputed the decision of AO and submitted before CIT(A) that the assessee was carrying on the business of hotel business. Due to increase in construction activity, the assessee had leased out the hotel to Shri Anil Ramkrishna Shetty vide Lease Agreement dated 1.11.2000. The assessee had not stopped business of running the hotel but had temporarily suspended the said business. The assessee had declared the royalt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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