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TMI Blog2021 (4) TMI 629X X X X Extracts X X X X X X X X Extracts X X X X ..... of the IT Act and Unexplained commission expense u/s69C by holding that once the books of accounts of assessee are rejected the same cannot be relied upon for making addition u/s68 or u/s69 of the Act. 1.2 CIT(A) ought to have appreciated the fact that the addition was made in the absence of evidence/no explanation about the nature and source of the credits to the tune of Rs. 1.63 crores and the same was agreed by the assessee as his undisclosed income for the AY 2012-13 by voluntarily disclosed vide sworn statement u/s131 of the income-tax Act,1961 on 13/02/2015. 1.3 CIT(A) erred in relying the decision of ITAT, Lucknow in the case of ITO vs. MS Builders Pvt. Ltd in ITA 564/LKW/2011, dated 26/05/2013, which is factually distinguishabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d loans at Rs. 1,62,55,000/-, addition towards profit from business on estimated basis by adopting 12.5% profit on gross receipts at Rs. 13,84,700/- and addition towards unexplained commission expenses at Rs. 15,66,000/-. 4. Being aggrieved by the assessment order, the assessee preferred an appeal before CIT(A). Before the CIT(A), the assessee challenged the additions made by the AO towards cash credits u/s.68 of the Act, on the ground that when books of accounts were rejected u/s.145(3) of the Act and profit is estimated, then same books of accounts cannot be considered for invoking provisions of section 68 to make addition towards unsecured loan, because in order to invoke provisions of section 68 of the Act, the essential condition is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts are rejected, the same books cannot be relied upon for making additions, ignoring the fact that it is not necessary that to make addition u/s.68 of the Act, books of accounts must be there. In a case, where there is no relationship between credits and business activity of the assessee, even though the AO has estimated business profits by rejecting books of accounts, still additions can be made towards unexplained credits u/s.68 of the Act. The ld.DR further submitted that it is a matter of fact that the assessee could not file any evidence to justify unexplained credit and unexplained commission before the AO and further agreed that unexplained credit represents his income from business and accordingly the AO has made additions. Therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loans taken by the assessee are genuine which are supported by necessary evidences and further the assessee has repaid the loan in subsequent financial year, the same cannot be considered as unexplained credit u/s.68 of the Act. 8. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. It is an admitted fact that the AO has rejected books of account u/s.145(3) of the Act and estimated profit from the business by adopting 12.5% net profit on gross receipts. It is also an admitted fact that once books of account are rejected u/s.145(3) of the Act, no further additions can be made by relying upon same books of account either in respect of cash credits u/s.68 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g his income from contract work". The Hon'ble High Court of Allahabad in the case of CIT vs. Banwarilal Banshidhar, (1998) 229 ITR 0229 had taken a similar view and held that "where income is assessed at G.P. rate by rejecting the books of assessee u/s.145(3), no disallowance can be made separately u/s.40A(3) of the Act". Therefore, from the above, it is very clear that to make additions u/s.68 or 69 of the Act, the essential condition is books of account should be maintained by the assessee for the relevant financial year. If books of account of the assessee are rejected and income is estimated by applying certain profit rate, it would take care of all expenses necessarily to be incurred for earning profit and hence, when profit is estimat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mounting to Rs. 80,00,000/-. A sum of Rs. 42,80,000/- was repaid through banking channels in the assessment year 2013-14 and balance sum of Rs. 37,20,000/- was repaid by cash. Similarly, out of Rs. 82,52,000/- loans taken from various parties during assessment year 2012-13, a sum of Rs. 43,00,000/- has been repaid in the assessment year 2013-14 through banking channels. A balance sum of Rs. 16,49,500/- was repaid during the assessment year 2014-15 in a cheque and a sum of Rs. 14,29,500/- was repaid in cash and remaining balance outstanding amount of Rs. 9,00,000/- was fully repaid during the assessment year 2015-16. Therefore, once loans taken by the assessee are genuine which are supported by necessary evidences and further said loans wer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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