Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, HYDERABAD BENCHES “B”, HYDERABAD
Before: SMT. P. MADHAVI DEVI & SHRI B. RAMAKOTAIAH
PER B. RAMAKOTAIAH, A.M. :
This is an appeal by assessee against partial confirmation of addition made by the Assessing Officer (AO), by the Ld. Commissioner of Income Tax (Appeals)-7, Hyderabad, vide order dated 20-01-2016.
Condonation of delay:
Assessee filed this appeal with a delay of 45 days, for which assessee had filed a petition for condonation along
ITA No. 871/Hyd/2016 :- 2 -:
with an affidavit. Considering the petition for condonation of delay, being satisfied with the sufficient cause for the delay, we hereby condone the delay in filing the appeal and the same is admitted to be heard on merits.
Briefly stated, assessee is an individual, deriving income from contract works. He filed return of income for the AY. 2011-12, declaring total income of Rs. 5,03,520/-. In the scrutiny assessment proceedings, AO noticed that there were deposits to the tune of Rs. 53,85,860/- in ICICI Bank during the year. As assessee has not furnished any information in response to various notices, and as there is failure on the part of assessee in complying with the notices, assessment has been completed u/s. 144 of the Act, bringing the same to tax as unexplained cash deposits in the bank u/s. 68 of the Act. While completing the assessment, AO also disallowed the deduction claimed under Chapter-VIA to an extent of Rs. 1 Lakh. Assessee has raised corresponding grounds before the Ld.CIT(A) and submitted the nature of deposits and contended that these deposits are his business turnover and cannot be brought to tax as such. Ld.CIT(A), however, did not agree fully with the contentions of assessee and confirmed the order partly by stating as under:
“5. The assessee during the course of Appellate proceedings contended that the assessee is in business of civil contracts and the deposits of cash are from the turnover of the assessee which is shown in the books of account. The assessee filed the Profit & Loss account and balance sheet for the relevant period. The assessee also filed copy of statement of ICICI Bank account. It is seen that the turnover shown by the assessee is Rs.59,65,817/- and the Bank account is
ITA No. 871/Hyd/2016 :- 3 -:
shown in the Balance sheet. The total credits including the cash deposits in the account, excluding the entries for cheque returned, is Rs.94.80 lacs. The credits to the extent of Rs.59,65,817 is treated as explained as turnover and found in the books of accounts. For the balance credits, no explanation is offered by the assessee. In view of the above, the balance credits of Rs.35,14,183 is treated as unexplained and addition to that extent is confirmed. The balance addition is deleted.
Further, though the raised ground regarding disallowance of Rs. 1,00,000 claimed as deduction under chapter VI, as no evidences are filed in respect of the claim, the action of Assessing Officer is confirmed”.
Assessee is aggrieved.
Ld. Counsel submitted that there is no dispute with reference to the amounts taken by the Ld.CIT(A) in the order. It was submitted that the total credits both by way of cash and cheque are to the tune of Rs. 94,88,645/- and assessee has admitted the turnover at Rs. 59,65,817/-. The balance amount of Rs. 35,22,828/- [slight variation from the order of CIT(A)] is also to be considered as turnover of assessee, as these amounts are all part of the business receipts.
4.1. It was submitted that the Ld.CIT(A) has accepted that the total credits are part of turnover but the amount cannot be brought to tax fully at 100%, but only a reasonable profit can be estimated on the above turnover. It was also submitted that assessee has offered profit around 10% of the gross receipts accounted for, therefore on the balance turnover only profit can be estimated. Ld. Counsel relied on various
ITA No. 871/Hyd/2016 :- 4 -:
case law for the proposition that the entire turnover cannot be taxed as income.
Ld.DR, however, submitted that assessee has not furnished any evidence about the nature of credits therefore, CIT(A) is correct in treating the balance credits as ‘unexplained’.
We have considered the rival contentions and perused the statements placed on record and the case law relied upon. As seen from the order of the AO, the order was an ex-parte order, therefore assessee was not in a position to explain the nature of receipt. Before the Ld.CIT(A), necessary explanation was given. CIT(A) in his order has partly accepted the turnovers to the extent they are accounted for and the balance was treated as unexplained cash credit. Since the nature of receipts are pertaining to the contract works, it is not correct on the part of the authorities to bring to tax the entire receipt as income. As seen from the nature of deposits in the bank accounts, there were corresponding withdrawals also and these seems to be petty cash receipts in the small contract works undertaken by assessee. Hon'ble Gujarat High Court in the case of CIT Vs. President Industries [258 ITR 654] (Gujarat- HC) has held that it cannot be matter of an argument that the amount of sales by itself cannot represent the income of assessee, who has not disclosed the sales. It is the realization of excess over the cost incurred that only forms part of the profit included in the consideration of sales. Similar view was
ITA No. 871/Hyd/2016 :- 5 -:
taken in the case of CIT Vs. Gurubachhan Singh J. Juneja [215 CTR 509] (Gujarat-High Court) and CIT Vs. Sharda Real Estate (P.) Ltd., [99 DTR 100] (MP-HC). In the case of Jyotichand Bhaichand Saraf & Sons (P.) Ltd., Vs. DCIT [139 ITD 10] the Co-ordinate Bench at Pune has confirmed that the addition could only be made only to an extent of gross profit earned on an unaccounted / suppress sales and not on the entire sales itself. Similar view was also taken in the case of ACIT, Cir1 Vs. M/s. Archana Trading Co in ITA No. 351 & 352/Coch/2011, dt. 28-02-2013 and also ACIT Vs. Pahal Food in ITSSA No. 42/Hyd/2005, dt. 30-09-2009, ITAT, Hyderabad.
6.1. Respectfully following the principles laid down by various High Courts and Co-ordinate Bench decisions, we are of the opinion that the entire turnover cannot be brought to tax as such and there can be reasonable profit estimation on the above amount. Generally income is estimated at 12.5% in the case of big contracts and since assessee has already offered @ 10% profit on the accounted turnover, we are of the opinion that income can be determined on the balance of the turnover at 12.5% of the turnover. AO is directed to do so. Accordingly, assessee’s ground are partly allowed.
6.2. Assessee has claimed deduction of Rs. 1 Lakh under Chapter-VIA, which was not allowed. Assessee is directed to furnish the necessary evidence to AO, who should verify and allow the claim as per the provisions of law. This
ITA No. 871/Hyd/2016 :- 6 -:
ground is considered allowed for statistical purposes. AO is directed accordingly.
In the result, the appeal of assessee is partly allowed for statistical purposes.
Order pronounced in the open court on 25th April, 2018
Sd/- Sd/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER Hyderabad, Dated 25th April, 2018 TNMM
ITA No. 871/Hyd/2016 :- 7 -:
Copy to : 1. Sri Narendra Reddy Maddi, C/o. Ch. Parthasarathy & Co., 1-1-298/2/B/3, 1st Floor, Sowbhagya Avenue, St.No.1, Ashok Nagar, Hyderabad.
The Income Tax Officer, Ward-9(1), Hyderabad.
CIT(Appeals)-7, Hyderabad.
Pr.CIT-7, Hyderabad.
D.R. ITAT, Hyderabad.
Guard File.