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TMI Blog2013 (6) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... as admitted the appeal on the following substantial questions of law, reads as under:- "1. Whether on the fact and in the circumstances of the case the Income Tax Appellate Tribunal was justified in deleting disallowance of unsubstantiated sundry creditors on the ground that where the estimate profit rate is applied any other addition can be made for cash credits from the undisclosed sources of the assessee and not for non-verification of the same, while failing to appreciate the fact that the Assessing Officer in his assessment order had exactly held the same and fulfilled the requirement under the law. 2. Whether or not both the CIT (Appeals) and the Income Tax Appellate Tribunal erred in disregarding the fact of assessments having been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department has filed the present appeal. With this background, Sri D.D. Chopra, learned standing counsel for the Income-tax Department justified the order passed by the AO. He further submits that the Tribunal has wrongly observed that the AO has not made the addition from undisclosed sources but has not accepted the sundry creditors on account of non-verification. The sundry creditors actually represented the business income on the assessee which was not disclosed. This aspect was ignored by the appellate authority. Learned counsel for the appellant, at the strength of written note, submits that the ratio laid down in the case of Kale Khan Hanif Mohd vs. CIT, 50 ITR 1 SC is fully applicable in the facts of the instant case but the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support of his submissions, he relied on the ratio laid down in the following cases : (a) Commissioner of Income Tax vs. Raghvendra Pratap Singh; 14 MTC 415 (All), where ex-parte assessment under Section 144 of the Income Tax Act was made. In such situation, the AO cannot make addition under Section 68 which has to be necessarily on the basis of entries in the books which not are rejected. It was further observed that when the books are not maintained, then 8% net profit can be computed on the gross receipts in the case of civil contractor. (b) CIT vs. Aggarwal Engineering Co.; 302 ITR 246 (P&H), where it was observed that once the net profit rate was applied, no further addition was called for in respect of purchase and introduction of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the past fifteen months. The creditors are, therefore, not verifiable and so the amount of Rs.23,14,417/- is being added to the total income of the assessed. In the instant case, the assessee has total contract receipts, as per Form 16AA, Rs.3,03,04,527/-. When the turnover is more than 40 lacs then the provisions of Section 44AD is not applicable. However, in the instant case, AO, has inspired from Section 44AD and applied the 8% net profit rate and made the addition on estimate basis on gross contract receipt. The assessee has shown the sundry creditors to the tune of Rs.23,14,417/-. No information, as required by law, was furnished by the assessee pertaining to the sundry creditors. When it is so then further examination of the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the unexplained sundry creditors were referable to the business income. The addition of the unexplained sundry creditors as income from other sources by the AO, therefore, was held valid. Further, the Hon'ble Apex Court in the case of CIT vs. Devi Prasad Vishwanath Prasad; 72 ITR 194 observed that where there is an unexplained credit, it is open to the AO to hold that it is income of the assessee, and no further burden lies on the AO to show that the income is from any particular source. It is for the assessee to prove that, even if the sundry creditors represents income, it is income from a source which has already been taxed. There is nothing in law which prevents the AO in an appropriate case in taxing both the sundry credit, the sou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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