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TMI Blog2018 (7) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... We are prima-facie satisfied that there are certain mistakes in determining the sale consideration by AO in the order. Since the profit is estimated on the sale consideration in each year, it is necessary to arrive at correct sale consideration. Therefore, AO is directed to examine these amounts and determine the sale consideration correctly, after giving due opportunity to assessee. The grounds in this regard are considered allowed for statistical purposes. Addition u/s 68 - Held that:- Since the income is based on estimation, the re-casted cash book need not be considered for the purpose of making addition u/s. 68 of the Act. It is true that law permits addition u/s. 68 of the Act even when books are rejected, but in the peculiar facts of the case, where assessee has prepared the cash book on the basis of the information received on enquiries caused by the AO, the so called cash credit of ₹ 40 Lakhs on 11-04-2007 need not be brought to tax separately as the income was declared at 20% on the sales turnover, rejecting statements prepared by assessee. The addition by the CIT(A) of an amount which was not added by the AO is not warranted on the facts of the case and hence AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income for the AY. 2007-08 but has not filed incomes for subsequent years. Assessing Officer (AO) has received information from the CIB that assessee has sold a property at Bangalore on 02-06-2008 for a consideration of ₹ 17 Lakhs. As assessee has not filed return for AY. 2008-09 and subsequent years, proceedings u/s. 147 of the Act were initiated and various notices have been issued. Assessee has declared only salary and interest incomes and has not disclosed income from development of property. AO has pursued the investigation diligently and came to know that assessee has purchased a site at Green Glen Layout, Bellandhur, Bangalore, constructed 12 flats and one penthouse, borrowed funds from State Financial Corporation and repaid the loans and also had different bank accounts in which sale proceeds have been deposited and expenditures have been incurred. After enquiry from the banks and from other officers at Bangalore, AO has completed the assessments in respective assessment years. In the course of assessment proceedings, assessee had admitted incomes on the turnover at about 17% in AYs. 2008-09, 2009-10 AY. 2010-11. However, AO did not consider the profit earned me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act receipts 1,86,792 Add: Interest on capital from M/s. Bhagyalakshmi Granites 1,18,943 Add: Interest on capital remuneration from M/s. Bhagyalakshmi Constructions 3,40,000 Add: Income from other sources 36,047 Total 26,88,781 Less: Interest on current account of M/s. Bhagyalakshmi Granites interest paid to others 6,78,268 Income Assessed 20,10,513 Aggrieved on the above three orders, assessee preferred an appeal before the CIT(A) and raised various grounds. 3. It was the submission of assessee that he has estimated the profit at about 17% which should be accepted. He also raised certain contentions that the turnover adopted by AO in AY. 2008-09 and 2009-10 are not proper and the sale consideration arrived at in AY. 2008-09 at ₹ 90,78,000/- should be at ₹ 89,16,318/-. Like-wise in AY. 2009-10, it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f account etc, he recasted his accounts. In the re-casted accounts, all the sale considerations and other transactions including the transactions unearthed by the AO are included and the appellant has very clearly explained each and every transactions on which the AO made additions, supra. In the re-casted accounts, all the receipts which are in the nature of income at ₹ 90,78,000/- (except the cash credits of ₹ 40 lakhs which would be dealt, separately/infra) have been admitted. The appellant requested to compute the income on an estimate basis as the books of account were not maintained by him. In this regard, appellant pleaded to direct the Assessing Officer to accept the revised computation made him at ₹ 15,15,774/- ie @ 17% profit on the entire sale consideration. This submission is considered. It is clear that the appellant is a real estate promoter and it is his first venture. Hence, there is no internal and external comparable data. Since the appellant's entire expenditure is not verifiable, it is considered that an estimation of profit @ 20% on the sale consideration of ₹ 90,78,000/- ie an income of ₹ 18,15,600/- from this business would m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17,34,000 28,50,000 Credited to Bank a/c 51,34,000 89,16,318 AY. 2009-10: Rs. Rs. Sales: Flat No. 5 Hemanth Pallavi 38,71,050 Flat No. 10 V. Rajasekharan 20,56,100 Add: Advance FY 2007-08 12,50,000 33,06,100 Flat No. 4 Manjeeth Singh Raana 25,15,000 Add: Advance FY 07-08 7,00,000 32,15,000 Flat No. 6 S. Eswaran 23,87,500 Flat No. 7 A Srinivasa Varma 18,87,500 Flat No. 8 P Joshi 18,92,500 Flat No. 9 K V Mohan Reddy 22,17, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in order to explain the cash receipt on that date. However, AO ultimately concluded that the cash book cannot be relied upon. The findings in para 28 on this issue are as under: It is pertinent to mention here that even though advance of Uttarhalli land is entered in the re-casted cash book for the AY. 2008-09. In view of the above detailed reasons, the submissions of the assessee the cash book is rejected . 8.1. Since the cash book is rejected, AO has not made any addition of this ₹ 40 Lakhs while completing the assessment. While adjudicating the issues of various additions, Ld.CIT(A) however, confirmed the addition of ₹ 40 Lakhs while estimating the profit at 20% on the sales turnover. Ld.CIT(A) took up on himself to consider the amount of ₹ 40 Lakhs. Assessee made detailed submissions including confirmations filed before the AO to submit that assessee has genuinely received ₹ 40 Lakhs as those people have creditworthiness. This issue was discussed elaborately by the Ld.CIT(A) from pages 19 to 30. Finally confirmed the addition of ₹ 40 Lakhs in para 10 of the order, as under: 10. The above submissions are considered. When the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by them almost at the time when the real estate boom began, could have appreciated, conservatively, anything between 200 to 300 % in 2013. They would not have settled for anything less than the impugned property or its equivalent property. The AO has clearly pointed out various inconsistencies elaborately in her order and rejected the appellant's claim. On the overall facts and circumstance, it is clear that the appellant has failed to prove the creditworthiness of the impugned creditors and also failed to prove the genuineness of the impugned credits and its associated facts and circumstances. Hence, the sources of ₹ 40 lakhs cash credited on 11.4.2007 stands unexplained and the AO is directed to assess it u/s 68 of the Act. The grounds of appeal on this issue are treated as dismissed . 8.2. It was the contention of Ld. Counsel that AO has not made any addition of the above amount as the cash book was rejected. Further, even the Ld.CIT(A) also rejected the books of account and estimated profits at 20% on the sales turnover. Accordingly, the deficit cash balance / receipt of advance is not material. Since the books of account are rejected, the addition of cash cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irected to delete the same. The order of CIT(A) to that extent is modified. Grounds are allowed. Addition of ₹ 1,29,600/- u/s. 40(a)(ia) : 9. This issue arises in AY. 2009-10. After rejecting the books of account and making assessment on the method followed by the AO, AO made an addition u/s. 40(a)(ia) on the interest payment reflected by assessee in the cash flow statement. AO brought this amount separately to tax as discussed in the computation of income extracted above. It was the contention of assessee before the Ld.CIT(A) that this amount was not claimed as an expenditure, hence disallowance per se does not arise. However, Ld.CIT(A) confirmed the same stating that the amount is to be disallowed as the provisions of Section 194A are attracted. Accordingly, assessee raised the ground. 9.1. After considering the rival contentions, we are of the opinion that the addition is not warranted. First of all, to invoke the provisions of Section 40(a)(ia) of the Act, amount has to be claimed as an expenditure. Since the amount was not claimed as expenditure by assessee in the computation of income or in the prepared books of account, the question of disallowance u/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the orders, various additions have been made which assessee has explained before the CIT(A) in detail. Ld.CIT(A) considered all those additions and explanations and has ultimately resorted to estimation of income at 20% on the sales determined by the AO. Since the books of account are rejected, CIT(A) deleted all the additions made by the AO. 10.2. We have considered the rival contentions and perused the addition made by the AO, the explanations given by assessee before the CIT(A). Assessee has agreed with the rejection of books of account and estimation of income at 20% was conformed in assessee s appeals. Consequent to that, we see no reason to consider the grounds of Revenue. We notice that AO has not followed any systematic method in bringing to tax various amounts in the order. While appreciating the efforts put in by the AO in unearthing the information and confronting of assessee, the ultimate assessment is not properly done and so, the only option is to estimate the income as was done by the Ld.CIT(A). In view of that, we find no merit in the grounds raised by Revenue. Accordingly the grounds raised by Revenue are rejected in all the three impugned assessment years. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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