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TMI Blog2016 (4) TMI 554X X X X Extracts X X X X X X X X Extracts X X X X ..... been pleaded by the assessee to have been carried on in the course of business of trading in sarees and dress materials and such type of business comes within the purview of provisions of section 44AF relating to profits and gains on retain business. In total the turnover of the assessee at ₹ 20,97,940/- (Rs.4,10,560/- + 16,87,380/-) has been accepted by both the lower authorities. Ld. CIT(A) has applied the net profit rate shown by the assessee on his labour contract income i.e. 47% on the total undisclosed credits of ₹ 16,87,380/-.by replacing the two additions made by the Assessing Officer including one related to peak credit. Thus when separate provisions are available for estimation of profits u/s 44AD and 44AF of the Act then it will not be proper to apply exhorbitant net profits rate on the total undisclosed credit which too have been accepted by both the lower authorities as business receipts. Once the business has been established and there is a special provisions for a businessman having turnover less than ₹ 60 lacs for applying net profit @ 5%/8% of the gross turnover as the case may be then we do not find the action of ld. CIT(A) to be proper in ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of hearing of the appeal. 2. Briefly stated facts as culled out of the case are that the assessee is the business of Jari labour income. He filed his original return of income on 31.12.2009 declaring total income at ₹ 1,64,104/-. The return was processed u/s 143(1) of the Act. Thereafter the assessee filed a revised return on 24.1.2011 declaring total income of ₹ 2,49,042/-. The case was selected for scrutiny assessment and notice u/s 143(2) of the Act was issued on 25.8.2010. As per AIR information assessee had deposited ₹ 16,87,380/- in the bank account held with SBI, Sosyo Circle Branch, Surat and this bank account was not disclosed by the assessee in his books of account. On being asked by the Assessing Officer about the reason for not disclosing these transactions of ₹ 16,87,380/- (by cash as well as by cheque) assessee submitted that these all are transactions relating to the business of trading in sarees and dress materials carried on by the assessee and the same was not accounted for in the regular books of account and income generated from the said business was not offered for taxation during the year. Accordingly ld. assessing officer framed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account are sales proceeds of unaccounted trading business. However, no evidence of existence of said retail trade has been furnished . As mentioned earlier, most of the withdrawals from the bank account are ATM withdrawals, while most of the deposits are in cash. 7.4 The appellant did not furnish evidence to link (he withdrawals with the expenditure and deposits with sale proceeds of trading business. The section 44^F exempts an assessee from the operation of the proviso to section 28 to Section 43C and sections 44AA and section 44AB. Therefore, in such cases, where section 44AF is applicable, -the section 44AA regarding maintenance of books of account does not apply. However, the appellant is still required to establish the existence of retail business and the correctness of turnover shown. Once the existence of retail business is established and the correctness of turnover is also established, the profit can be taken at 5% of the turnover provided the business does not exceed ₹ 40,00,000/-. 7.5 In the case of the appellant, he failed to establish any evidence regarding existence of retail trade. Therefore, the deposits made in the undisclosed bank account either repr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly added the amount of Rs.l.34,900/- taking the net profit of 8 % of the. total turnover of Rs, 1687380/- of cloth business, as against correct income of net profit of 5 % only as provided u/s 44AF of the Act. Again he has also wrongly added an amount of ₹ 82,690/- being the .peak credit of the undisclosed bank account No, 30408683898 with State Bank of India, Sosyo Circle Branch, Surat. In connection ld. AR stated that assessee has deposited ₹ 90.000/-(Rs.40.000/- on 30-06-2008. ₹ 25,000/-. on 02-07-2008 and ₹ 25.000/- on 08/07/2008) .in the said bank account which is already debited in capital account and therefore there is no question of addition of peak. Moreover in fact assessee has already disclosed an income of ₹ 84.369/- at 5% of the total :turnover of the cloth business of Rs,16,87.380/- U/s, 44AF of the Act. in the revised Return of Income filed on 24/01/2011. Thus this is the wrong and double addition to the income declared as the profit on the undisclosed turnover of cloth business reflected in the bank account is considered in the income assessed then there is no question of further adding peak credit of the said bank account of ₹ 82 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the assessee. Paras 4.2 and 4.3 reads thus: 4.2. I have gone through the asst. order passed by AO and the written submission filed by the appellant. I have also considered the evidence produced by the appellant in his paper book. I find considerable force in the contentions raised by AO that the transactions recorded in the bank a/c no. 2831 with Amarnath Co-op Bank Ltd. do not pertain to his HUF, The contemporary evidence by way of filing the return of income in the status of HUF after the time allowed u/s. 139(4) of the Act and that too after issuance of first show cause notice by AO, making application for PAN on 28.07.2009, neither getting registered under Gujarat VAT Act nor filing any returns under it, failure to furnish name and address of the suppliers in respect of Iron scrap business claimed by the appellant - all these facts clearly establish that claim of the business of HUF was an afterthought and it was rightly rejected by AO, 4.3. Now, coming to the next contention of the appellant that the transactions in the said bank a/c were related to the Iron Scrap business, it was rejected by AO simply for the reason that sales cannot precede the purchases because ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the book result declared by the appellant cannot be accepted even the most of the credits (sales) are matching with the debits (purchases) which shows that the appellant has not deposited entire sale proceeds in this bank a/c. Therefore I have no alternative but to estimate income by estimating the sales. The total turnover of the appellant in this business is estimated at ₹ 36 lacs and the net income u/s 44AF would work out to ₹ 1.80 lacs. Accordingly the addition of ₹ 35,33,414/- in respect of cash deposited in the bank a/c as undisclosed income is hereby restricted to ₹ 1.80 lacs but by way of business income from retail trade of the appellant. 8. The aforesaid finding has been confirmed by the learned ITAT by passing the impugned judgment and order and the order passed by the learned CIT(A) restricting the addition from ₹ 35,33,414/- to ₹ 1.80 lacs has been confirmed by the learned ITAT. 9. We are in complete agreement with the view taken by the learned CIT(A) as well as learned ITAT. The learned CIT(A) as well as learned ITAT have rightly held that the entire amount of ₹ 35,33,414/- cannot be added in the income of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns-44ad-44ae-and-44af-in-a-brief.html#sthash.G3bOqQ2A.dpuf E. Section 44AF Business of retail trading of goods (Applicable till A.Y. 2010-11, this section will become inoperative from AY 2011-12 and the retail traders can choose to be governed by section 44AD from A.Y. 2011-12 which requires presumptive income at 8% of gross receipts/turnover) 1] Applies to: Any person engaged in the business of retail trade in any goods or merchandise shall be covered by this provision. If his turnover from the above business do not exceed ₹ 40 lakhs. 2] Deemed Income: 5% of the total turnover of such person or a higher sum voluntarily declared by him shall be deemed to be his income from such business. Refer to A] Conditions and B] Computation below. Common Conditions and Computation method: A. Conditions: All deductions u/s. 30 to 38 including depreciation deemed to be allowed. No further deduction allowed under those sections. The written down value of asset used in the business will be computed as if depreciation, as applicable, was allowed. It will be assumed that disallowances if any u/ss. 40, 40A and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in turn assessee performs the contractual work with the help of labourers on the sarees. On the other hand, the undisclosed credit of ₹ 16,87,380/- have been pleaded by the assessee to have been carried on in the course of business of trading in sarees and dress materials and such type of business comes within the purview of provisions of section 44AF relating to profits and gains on retain business. In total the turnover of the assessee at ₹ 20,97,940/- (Rs.4,10,560/- + 16,87,380/-) has been accepted by both the lower authorities. Ld. CIT(A) has applied the net profit rate shown by the assessee on his labour contract income i.e. 47% on the total undisclosed credits of ₹ 16,87,380/-.by replacing the two additions made by the Assessing Officer including one related to peak credit. 14. From going through our above discussions we find that when separate provisions are available for estimation of profits u/s 44AD and 44AF of the Act then it will not be proper to apply exhorbitant net profits rate on the total undisclosed credit which too have been accepted by both the lower authorities as business receipts. Once the business has been established and there is a sp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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