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TMI Blog2016 (12) TMI 1403X X X X Extracts X X X X X X X X Extracts X X X X ..... ry income, however, on perusal of the submissions of the assessee, the assessee himself admitted that he was working with a meager salary of ₹ 10,000/- per month. The assessee failed to demonstrate how with a meager salary of ₹ 10,000/- per month could show such a huge opening of capital of ₹ 8,14,500/-. Therefore, we are of the view that the assessee failed to prove the sources for opening capital brought forward from previous years and accordingly, the A.O. has rightly made additions. Unexplained amount being difference between initial expenditure incurred and sources in the form of unexplained credits and opening capital balance - Held that:- We find that the assessee had been given sufficient opportunity to explain the case before the A.O. Though sufficient opportunity has been given, the assessee failed to file necessary evidences to prove his case. Even before CIT(A), the assessee failed to file necessary evidences to justify the additions made by the A.O. Therefore, we are of the view that there is no merit in the claim of the assessee for one more opportunity of hearing and accordingly the same is rejected. Additions towards income from other source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and scaled down estimation of net profit from 20% to 10% of the purchase price, however, confirmed additions made by the A.O. towards unexplained amount, unexplained creditors, unexplained credit in capital account and income from other sources. Aggrieved by the CIT(A) order, the assessee is in appeal before us. 4. The first issue that came up for our consideration is estimation of net profit from the business. The A.O. rejected books of accounts and estimated net profit of 20% on total stock put to sale. The A.O. was of the opinion that the assessee s books of accounts are not susceptible for verification and also the assessee failed to substantiate expenditure debited to the profit loss account with necessary evidences. The A.O. further was of the opinion that the assessee could not produce stock registers and also failed to furnish quantitative details relating to sales and closing stock. Therefore, rejected books of accounts and estimated net profit of 20% on total stock put for sale. It is the contention of the assessee that net profit estimated by the A.O. is very much on higher side. The assessee further contended that under similar facts and circumstances and similar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee is into the business of dealing in IMFL. Therefore, we are of the view that the A.O. was not justified in relying upon the judgement, which was rendered under different facts to estimate the net profit. On the other hand, the Ld. A.R. for the assessee, relied upon the decision of ITAT, Visakhapatnam bench in the case of T. Appalaswamy Vs. ACIT in ITA No.65 66/Vizag/2012. We have gone through the case laws relied upon by the assessee in the light of the facts of the present case and finds that the coordinate bench of this Tribunal, under similar circumstances held that estimation of 5% net profit on purchases is reasonable. The relevant portion of the order is reproduced hereunder: 3. We have heard the parties, perused the orders of the revenue authorities as well as other materials on record. It is the contention of the Ld. A.R. that the estimation of profit at 16% is high and excessive considering the normal rate of profit in this line of business. Whereas, the Ld. D.R. supported the order of the CIT(A). Having considered the submissions of the assessee, we are of the view that the issue is no more res integra in view of a series of decisions of the ITAT Hyderabad b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al years. The A.O. also called upon the assessee to explain the sources for initial expenditure incurred for paying license fees and bank guarantee deposits. In response to show cause notice, the assessee submitted that opening capital was brought forward from earlier year was out of his past savings from his previous employment and other income. In respect of unsecured loans, the assessee has filed confirmation letter from the parties. In so far as initial expenditure towards license fees and bank guarantee commission, the assessee explained that sources for expenditure is met out of unsecured loans borrowed from friends and relatives and also opening capital brought forward from previous financial year. 8. The A.O. after considering the explanations of the assessee observed that the assessee failed to substantiate unsecured loans with necessary evidences. Though, the assessee filed confirmation letters from unsecured loans, the confirmation letters filed are in prototype form without any details as to how loan was borrowed from the creditors. The assessee also failed to prove the creditworthiness and genuineness of the transactions. Therefore, opined that the assessee failed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that when books of accounts are rejected and profit is estimated, the A.O. was erred in making separate additions towards expenditure. When net profit is estimated on gross receipts, it will take care of expenditure incurred in connection with the business and hence, making separate additions towards few expenditures amounts to double addition. The A.R. further submitted that if you take into account the total additions made by the A.O. towards unexplained expenditure and estimation of net profit, the profit would go up to 42.1%, which is very much on higher side when compared to the nature of business of the assessee. It was further submitted that though assessee filed necessary evidences before the lower authorities, the lower authorities failed to appreciate the facts in right perspective, therefore, requested to give one more opportunity to substantiate the claim with necessary evidences and accordingly requested to set aside the issue to the file of the A.O. for further verification. 10. The Ld. D.R. on the other hand strongly supported the order of the CIT(A). The D.R. further submitted that the assessee failed to file necessary evidences before the A.O. to subst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, the A.O. was erred in making additions towards unsecured loans, credits in capital accounts and unexplained amount. 12. Having heard both sides, we do not find any merits in the arguments of the assessee for the reason that the assessee failed to prove genuineness of the transactions and creditworthiness of the parties. Although, the assessee filed confirmation letters from the creditors, all the confirmation letters are in prototype form without any details as to how the loan was accepted. Though assessee claims to have accepted the loan from agriculturists, fails to prove the sources of the creditors to substantiate the creditworthiness of the parties. Therefore, we are of the view that the assessee has failed to discharge its initial onus cast upon him by furnishing necessary identity, creditworthiness of the parties and genuineness of the transactions. Accordingly, we uphold addition made by the A.O. In so far as additions towards opening capital is concerned, though assessee claims to have explained the sources for opening capital out of his past savings, the assessee failed to prove the sources with necessary evidences. The assessee claims to have savings out o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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