HEMANTKUMAR RAMESHBHAI MISTRY,BARDOLI vs. ITO, WARD-1, BARDOLI

The assessee has raised the following grounds of appeal: “1) The Ld. CIT (Appeals) has erred in law and on facts confirming the addition of Rs.15,04,000/- on account of alleged unexplained cash credit u/s 68 of the Act. 2) The Appellant prays before your Honour that the above additions may please be deleted and appeal be allowed.

Being aggrieved by the assessment order, the assessee filed appeal before CIT(A). The CIT(A) dismissed the appeal.

The Ld. Authorised Representative (in short “Ld. AR”) for the assessee submitted that the reply to notice u/s. 148 along with return of income was given by assessee's father & his tax consultant. But the assessee realized that only agricultural income was shown & not assessee's income derived from construction activity, the assessee filed revised computation of income thereby stating correct source of income earned u/s. 44AD of the Act from construction income. The cash deposits was mainly from this activity. The Ld. AR submitted that the assessee filed bills issued for construction activities, assessee's qualification details, confirmation of parties through whom construction income received. All these details were ignored by AO & CIT(A).

The Ld. Departmental Representative (in short “Ld. DR”) submitted that the assessee at the time of assessment proceedings has not given the details of labour expenses and in fact notices issued u/s 133(6) of the Act

We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the AO has not doubted that the assessee was carrying out civil construction work. The confirmations submitted by the assessee of the parties are not supported by the PAN number, copy of ITR, or computation of balance sheet, profit and loss account of those parties. The creditworthiness of these parties was not at all established by the assessee, but the assessee has given the corrected computation of income during the assessment proceedings, thereby including the profit declared, u/s 44AD, from the said construction business. The cash flow statement also does not give reflection of these parties at any stage and merely gives the cash input deposited. At page 25 and 26, the assessee has given the two bills of civil work of the client Mr. Kishorebhai Patel and Tusharbhai Patel without any details of their PAN number or income of tax return. But at page 29 and 30, the said parties have given confirmations thereby stating that the civil construction work was carried out by the assessee and those two parties are neighbors to each other and work was related to civil construction work of residential house. Assuming that these construction activities have earned to the assessee the cash, the assessee has not given the bifurcation of the cash received and deposited on various dates as seen in the cash flow statement. Thus, the assessee has not fully established the cash deposit, and therefore the declared business profit of construction activity u/s 44AD to be taken into account and the peak credit should be added to the extent of 9% as prevailed in the construction business.