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TMI Blog2015 (10) TMI 1492X X X X Extracts X X X X X X X X Extracts X X X X ..... k account, the addition should be made to the extent of gross profit on such undisclosed business turnover and not the entire deposit in bank account. Regarding the gross profit rate the addition to the extent of accepted gross profit rate of 10.82 per cent. of the turnover of ₹ 16,90,811 should be confirmed. We order accordingly. Addition on account of initial capital for doing this business outside the books - Held that:- Assessee was having opening balance of ₹ 3,18,872 in this bank account and in our considered opinion, for doing an annual turnover of ₹ 16.90 lakhs for which the addition has been made by the Assessing Officer, this much fund is sufficient as initial capital. Hence, in our considered opinion, in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - - Dated:- 16-4-2015 - SHRI SUNIL KUMAR YADAV AND SHRI A.K. GARODIA, JJ. For the Appellant : Shri Swaran Singh, FCA, Shri S. K. Jain, FCA For the Respondent : Shri Puneet Kumar, D. R. ORDER A. K. Garodia (Accountant Member).- These are the cross-appeals filed by the assessee and the Revenue, which are directed against the order of the Commissioner of Income-tax (Appeals)-II, Kanpur dated March 11, 2013 for the assessment year 2009-10. 2. Since the grounds involved in these appeals are inter-connected, we decide the issues raised by both sides simultaneously. In fact an addition of ₹ 16,90,811 was made by the Assessing Officer in respect of deposits in savings bank account of the assessee and against this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver in the bank account and for capital employed for doing this business outside books. He submitted that the gross profit in the regular business of the assessee is 5.5 per cent., as has been noted by the Assessing Officer in para 3 of the assessment order. Regarding the capital employed in this business, he submitted that the summary of bank account is available on page 30 of the paper book as per which, there was opening balance of ₹ 3,18,872 and therefore, no addition is called for on account of initial funds for doing this business. Regarding the addition made by the Assessing Officer in respect of creditors and partly confirmed by the Commissioner of Income-tax (Appeals), he drew our attention to para 7 of the assessment order w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer that 5.5 per cent. gross profit addition should be made in respect of this deposit in bank account but in para 2 of the assessment order, it is noted by the Assessing Officer that in the proprietorship concern of the assessee M/s. Hoor Creators, the turnover was ₹ 49,02,310 and gross profit was ₹ 5,30,419. Hence, it is seen that the gross profit rate in Hoor Creators is 10.82 per cent. and not 5.5 per cent. Hence, in our considered opinion, the addition to the extent of accepted gross profit rate of 10.82 per cent. of the turnover of ₹ 16,90,811 should be confirmed. We order accordingly. 5.2. Regarding the addition on account of initial capital for doing this business outside the books, we find force in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition to be made under section41(1), it is essential that the liability should cease to exist as per the judgment of the hon'ble apex court rendered in the case of Chief CIT v. Kesaria Tea Co. Ltd. [2002] 254 ITR 434 (SC). In this case, it was also held that it is essential that a benefit is obtained in respect of such trading liability by way of remission or cessation thereof during the year. In the present case, it is seen that the assessee is still showing these creditors as liability. Now we examine the provisions of section 41(1) of the Act. We find that as per Explanation 1 to section 41(1), if the assessee has written back the liability in his accounts then it will be considered that even by unilateral act of the assessee, there ..... X X X X Extracts X X X X X X X X Extracts X X X X
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