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TMI Blog2017 (5) TMI 1205X X X X Extracts X X X X X X X X Extracts X X X X ..... anically, without applying it’s mind with reference to the obtaining facts and the merits of the assessee’s statement. In fact, considering the turnover (total receipt) to be a part of the transport business instead (conduct of which is proven), would imply a lower profit rate and, besides, a lower amount being added on account of capital investment in-as-much as the said business would entail a higher capital turnover ratio, besides trade credits. There could be a scenario of the adjusted peak credit being below ₹ 8.50 lacs. This would not by itself warrant a reduction in the amount of addition on account of the capital employed in the two businesses. This is as, apart from the bank balance, which the peak credit in a bank account signifies, the assessee has admittedly other working capital assets in the form of trade debtors, and which have not been taken into account. This is as the investment in the trade has been estimated on the basis of a working capital (i.e. cash to cash) cycle, and which includes toward trade debts/credits as well. The assessee’s argument with reference to peak credit in the account thus stands also addressed. The addition for ₹ 23.21 lacs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The source of the cash deposits of ₹ 23.21 lacs was stated as from the debtors of the transport and finance businesses, names of which were given, while conceding that their addresses and PANs could not be furnished on account of the reservation of the debtors. The source of the cash deposits being thus not satisfactorily explained, the entire cash deposited in account was considered as unexplained and deemed as the assessee s income u/s. 69/69A of the Act (even as the assessment order makes reference to s. 68). The same stands confirmed in appeal on the ld. CIT(A) finding the assessee s case to be wholly un-evidenced. The plea as to the applicability of s. 44AD of the Act could not also therefore be accepted. Aggrieved, the assessee is in second appeal. 3. I have heard the parties, and perused the material on record. 3.1 The assessee s claim of being in transport business is borne out by the receipt from the IOC, a public sector undertaking, on that count. How, it is wondered, could then the Revenue not accept the same ? True, the assessee has not shown to be owning any goods carriages. However, owning the same is not a pre-requisite for being in the transport busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative of the funds therein that are not explained, claiming, thus, a rotation of funds, i.e., in the business/es being undertaken. The interest rates, as stated, are also at a healthy figure, corresponding with the rates obtaining in the unorganized sector, which are markedly higher than that obtaining in the regular bank or organized sector. In other words, both the capital investment and the interest thereon, i.e., the total receipt, would stand to be brought to tax. This of-course is subject to applying a turnover ratio, which any business would entail. The Revenue has, in rejecting the plea, acted mechanically, without applying it s mind with reference to the obtaining facts and the merits of the assessee s statement. In fact, considering the turnover (total receipt) to be a part of the transport business instead (conduct of which is proven), would imply a lower profit rate and, besides, a lower amount being added on account of capital investment in-as-much as the said business would entail a higher capital turnover ratio, besides trade credits. 3.3 I may next proceed to examine the aspect of quantum, i.e., as to what, under the circumstances, would be a reasonable estimate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e profit component included in the turnover up to the relevant date (of the peak credit). For example, if the peak credit is (say) ₹ 12 lacs (as on 30.09.2009), the adjusted peak credit would be as follows: Peak credit : ₹ 12.00 lacs Proportionate profit : ₹ 1.61 lacs (total profit ₹ 3.22 lacs x 6/12) Adjusted peak credit: ₹ 10.39 lacs (Rs. 12 lacs - ₹ 1.61 lacs) This could in fact be fine tuned further by estimating the profit component, instead of on time basis (i.e., at 6 out of the total 12 months), on the basis of the receipt, i.e., up to the date of the peak credit. The average profit rate being 12 per cent (i.e., ₹ 3.22 lacs on a total gross receipt ₹ 26.64 lacs). As such, a peak credit of (say) ₹ 10 lacs, irrespective of the date on which it obtains, would yield an adjusted peak credit of ₹ 8.80 lacs, so that it is this amount that would stand to be added, and not ₹ 10 lacs. Then, again, there could be a scenario of the adjusted peak credit being below ₹ 8.50 lacs. This would not by itself warrant a reduction in the amount of addition on account of the capital employed in the two busines ..... X X X X Extracts X X X X X X X X Extracts X X X X
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