Loading judgment…
Facts
The assessee, a contractor, declared income of Rs. 5,10,720/- and contract receipts of Rs. 82,57,097/-. The AO estimated income at 10% without rejecting books of accounts, added interest income and peak credits in bank accounts, treating them as undisclosed income. The CIT(A) confirmed these additions.
Held
The Tribunal held that the AO's estimation of profit at 10% was excessive and directed to adopt 8%. Regarding additions of interest, balance, and peak credits, the Tribunal found that some accounts related to HUF and the assessee's wife, thus restoring these issues to the AO for fresh consideration.
Key Issues
Whether the estimation of profit by the AO at 10% without rejecting books of accounts is justified? Whether additions relating to interest, bank balances, and peak credits are rightly made in the hands of the assessee?
Sections Cited
143(3), 69A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: SHRI GEORGE GEORGE K & SHRI JAGADISH
आदेश / O R D E R
PER JAGADISH, A.M : Aforesaid appeal filed by the assessee for Assessment Year (AY) 2011-12 arises out of the order of Learned Commissioner of Income Tax, National Faceless Appeal Centre (NFAC), Delhi [hereinafter “CIT(A)”] dated 24.05.2024 in the matter of assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) of the Income-tax Act, 1961 (hereinafter “the Act”) on 10.03.2014.
The assessee is a contractor and filed his return of income declaring total income of Rs.5,10,720/-. The assessee has shown contract receipts of Rs.82,57,097/- and filed Form-3CB and Form- 3CD. However, the A.O ignoring the books of accounts has estimated income @ 10% as the assessee has not submitted evidence in support of the expenditure. The A.O also made addition in respect of interest credited in the bank account as the assessee has only shown interest of Rs.45,942/- in the return of income as against Rs.1,46,130/- appearing in the bank statement as under:
Account No. Balance as at Interest credited in 31.03.2011 statement 0200-00186118-11001 -- 4598 0200-00186162-11001 54,638 4030 0200-00186163-11001 45,056 3329 0200-00186232-11001 52,301 3983 0200-00186955-11001 6,94,718 41298 0200-00187373-11001 5,13,256 37094 0200-00186272-11001 7,50,588 30193 0200-02700272-11001 7,50,588 30193 0200-02700320-11001 5,37,093 21605 26,47,650 1,46,130
The A.O also added the balance as on 31.03.2011 in respect of above interest as undisclosed income.
The A.O has also made addition of peak credit in two bank accounts of Rs. 14 Lakhs and Rs. 15 lakhs u/s. 69A of the Act as under:
Account No. Date Amount 182515 15.06.2010 9,00,000 16.06.2010 8,00,000 25.08.2020 10,00,000 27.08.2010 14,00,000 183455 03.05.2010 15,00,000 13.05.2010 7,00,000
Aggrieved, the assessee filed an appeal before Ld. CIT(A). On appeal, the Ld. CIT(A) has confirmed all the additions.
The Ld. Authorized Representative (A.R) on the estimation of income from contracts @ 10% on the gross receipts has submitted that the assessee has maintained regular books of accounts and also filled audit report in Form-3CD. The A.O has estimated the profit @ 10% without rejecting the books of accounts, which is excessive and not in accordance with law. The Ld. AR has submitted that in similar cases, the Hon’ble Madras High Court in the case of CIT vs. Shri Srinivasan Devendran in TCA No.15 of 2023 dated 10.01.2023 has approved the estimation @ 5%.
5.1 As regard to addition of interest income, the Ld. AR has submitted that out of addition of interest of Rs. 1,46,130/-, interest of Rs.88,892/- relates to HUF account and therefore, should not be considered in the hand of the assessee. The Ld. AR has submitted that out of remaining interest of Rs.57,238/-, the assessee has already offered Rs. 45,942/- and therefore, only addition to that extent can be sustained.
5.2 As regard to addition on account of balance as on 31.03.2011, the Ld. AR has submitted that Rs.18,00,937/- relates to the HUF account and the assessee has already disclosed interest in respect of balance of Rs. 6,94,718/- . Therefore, addition can be made only to the extent of Rs. 1,51,995/-.
5.3 As regard to addition on cash deposit in bank account of Rs. 29 Lakhs, the Ld. AR has submitted that Rs. 15 Lakhs relates to the A/c.
No.0200-00183455 which is in the name of HUF. As regard to balance of Rs. 14 Lakhs, the Ld. AR has submitted that the same is given by his wife Smt. Sakunthala and therefore, deposit is explained.
The Ld. Departmental Representative (DR), on the other hand, has relied on the orders of lower authorities.
We have heard the rival submissions, and perused the materials available on record. The A.O has rejected the books of account for the reason that the assessee has not provided evidence in support of expenses claimed and estimated income @10% of the contract receipts. In our opinion, the estimation of profit @10 % by the A.O is excessive, therefore we direct A.O to adopt profit @8% of contract receipts. As regards to addition of interest of Rs 1,46,130, balance as on 31.03.2011 of Rs 26,47,650/- and peak credits in the bank accounts of Rs.29,00,000/-, it is evident from the bank statements that some of these accounts are in the name of HUF, but A.O has made the addition in the hand of assessee. Therefore, these issues are restored back to the file of A.O for fresh consideration. We direct the Assessee to submit all necessary evidence in support of his contention before the A.O, who will pass order after affording proper opportunity to the assessee. In view of the above, the appeal filed by the assessee is partly allowed.
In the result, the appeal filed by the assessee is partly allowed.
Order pronounced on 12th March, 2025.