9911796707
TMI Blog2014 (1) TMI 1397X X X X Extracts X X X X X X X X Extracts X X X X ..... hey are not proved genuine. 3. Brief facts of the issue relating to ground Nos. 1 and 2 are that the assessee is engaged in execution of civil contract works. In the course of assessment in spite of giving opportunity to the assessee to produce the books of account, the assessee not produced the same. Being so, the AO estimated the income of the assessee at 8% of gross receipts of Rs. 2,41,31,686. The income from contract works was worked out at Rs. 19,30,535. The assessee carried on appeal on this issue to the CIT(A). The CIT(A) directed the AO to estimate the income from contract receipts at 7% on the turnover of Rs. 1,58,21,848 and directed the AO to exclude the seigniorage charges from contract receipts at Rs. 83,09,838. Against this, the Revenue is in appeal before us. 4. None appeared for the assessee. We have heard the learned DR. After hearing the learned DR, we find this issue came before this Tribunal in the case of M/s. C. Eswara Reddy & Co. vs. ACIT in ITA Nos. 668 & 669/Hyd/2009 for A.Ys. 2003 04 and 2004 05, respectively. The Tribunal vide order dated 31st January, 2011 held as follows: "6. We have considered the rival submissions on either side and perused the mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,40,420. It is a well known fact that whenever the turnover increases the profit ratio would go down. Merely because the turnover increases the profit may not go up. Therefore, we do not find any justification in the distinction made by the learned DR to show that this Tribunal estimated the profit at 8% in the case of M. Bhaskar Reddy (supra) only because the turnover was Rs. 51,40,420. A bare reading of the order of this Tribunal in M. Bhaskar Reddy (supra) clearly shows that this Tribunal after considering the judgement of the Apex Court in C. Velukutty, 60 ITR 239 and the decision of the Special Bench of this Tribunal in Arihant Builders Pvt. Ltd. vs. ACIT, 291 ITR 41 (SB) and by taking a clue from section 44AD of I.T. Act the profit was estimated at 8%. Admittedly section 44AD would be applicable in respect of a case where the gross contract receipt does not exceed Rs. 40 lakhs. Wherever the gross contract receipts exceed Rs. 40 lakhs the provisions of section 44AD are not applicable. Therefore, the profit can be estimated either at lower than 8% or above 8% depending upon the factual situation. As discussed earlier, for the purpose of estimating the profit various factors suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the depreciation. We have carefully gone through the judgement of the jurisdictional High Court in the case of Indwell Construction (supra). In the case before the jurisdictional High Court an addition was made towards interest and remuneration paid to the partner when the profit was estimated. The jurisdictional High Court after considering the provisions of section 29 and 40 found that no separate addition shall be made. The contention of the learned counsel for the assessee is that depreciation shall be on the WDV from the profit computed/estimated. Therefore, depreciation shall be allowed on the profit computed. 13. We have carefully gone through the provisions of section 44AD of the Act. Now doubt this provision is applicable for those cases where the turnover/total contract receipt does not exceed Rs. 40 lakhs. However, by Finance (No. 2) Act of 2009 with effect from 1.4.2011 the Legislature removed the restriction of the total contract receipts of Rs. 40 lakhs. By taking a clue from the provision of section 44AD as is applicable for the assessment year under consideration and the provisions which are applicable with effect from 1.4.2011, we find that the deduction availa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra) may not be of any assistance to the Revenue in this case. Accordingly we direct the Assessing Officer to allow the salary and interest paid to the partner subject to the limitation provided in section 40(b) of the Act. 5. Being so, in our opinion, the issue is squarely covered by the above order of the Tribunal. As such, the income of the assessee is to be estimated at 8% of gross contract receipts unless the assessee furnished the details of seigniorage charges. Before the AO the assessee has not furnished details of contract receipts. Accordingly, we direct the assessee to furnish details of contract receipts as well as seigniorage charges. On receipt of these details, the AO shall apply the net profit at 8% on the contract receipts. Accordingly, this issue is remitted back to the AO for fresh consideration. 6. Ground No. 3 is with regard to deletion of addition of Rs. 26,50,535 on the ground that once income is estimated, there is no scope for further addition. Facts relating to this issue are that the AO made further addition of Rs. 26,50,350 towards outstanding sundry creditors in respect of which the assessee not furnished details like name, postal address, etc. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he beginning and also before us is that the cash credits are genuine. The assessee never took specific stand that these unexplained cash credits are referable to the income from disclosed sources viz., business, whose income has been estimated by the Revenue authorities. In order to delete this addition, the assessee is bound to explain the source of credit, genuineness of the transaction and the capacity of the lender to advance the same. As the assessee failed to explained these criteria, we have no hesitation in confirming the action of the CIT(A). For this purpose, we place reliance on the judgement of jurisdictional High Court in the case of CIT v. Maduri Rajaiahgari Kistaiah (120 ITR 294). Further, we place reliance on the judgement of Hon'ble Supreme Court in the case of CIT v. Devi Prasad Viswanath Prasad (72 ITR 194) wherein held that on rejection of books of account, business income estimated, addition towards unexplained cash credit separately valued. 13. Further, the approach of the various High Courts' is not uniform on the above aspect as would be seen from the following cases. In CIT v. Aggarwal Engg. Co. (Jai.) (2006) 206 CTR (P&H) 648, the Punjab & Haryana High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld to be undisclosed income of a disclosed source, the income of which source had previously been taxed on the basis of an estimate ..... the question whether income represented by an entry in the books of a business is income of that business or of another business would have to be decided on the facts which showed the business to which it belonged. But quite clearly, the answer to that question would not depend on whether the income from the first mentioned business had been computed on the basis of a return filed or of an estimate of the income made by the taxing authorities Therefore, it cannot be said that the taxing authorities were precluded from treating the amounts of the credit entries as income from undisclosed sources simply because the entries appear in the books of a business whose income they had previously computed on a percentage basis." 14. There is no presumption that any cash credit entry found in the business accounts of the assessee is related to his concealed income from the same business [CIT vs. Maduri Rajaiahgari Kistaiah (1979) 120 ITR 294 (AP) where the assessee pleads that the impugned cash credits came out of suppressed profits which are already inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment year may constitute a fund, even though concealed, from which the assessee may draw subsequently for meeting expenditure or introducing amounts in his account books. But it is quite another thing to say that any part of that fund must necessarily be regarded as the source of unexplained expenditure incurred or of cash credits recorded during a subsequent assessment year. The mere availability of such a fund cannot, in all cases, imply that the assessee has not earned further secret profits during the relevant assessment year. Neither law nor human experience guarantees that an assessee who has been dishonest in one assessment year is bound to be honest in a subsequent assessment year. It is a matter for consideration by the taxing authority in each case whether the unexplained cash deficits and the cash credits can be reasonably attributed to a pre-existing fund of concealed profits or they are reasonably explained by reference to concealed income earned in that very year. In each case, the true nature of the cash deficit and the cash credit must be ascertained from an overall consideration of the particular facts and circumstances of the case. Evidence may exist to show that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee's case that the cash credits found in his books came out of the addition made to his income for an earlier year, it is undoubtedly open to him to put forward such a plea while furnishing explanation regarding such cash credits. While the fact of making of intangible additions in the earlier years is undoubtedly a matter to be considered by the Assessing Officer in judging whether the cash credits are satisfactorily explained by the assessee, the burden of proof rests squarely on the shoulders of the assessee to establish the truth and tenability of the explanation furnished by him. In other words, the assessee's explanation must satisfy the Income-tax authorities that the cash credits represent intangible additions made in the earlier years. For weighing the assessee's explanation, the assessee's conduct, his explanation at the initial stage and the shift, if any, in later stages and also the material, if any, linking up the cash credit entries would be relevant factors. The assessee, instead of merely raising an argument, must support his claim by proper explanation, affidavit and material. Thus, there is no general or absolute rule to the effect that whenever additions to ..... 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