SRI BUDDAN GOWDA ,RAICHUR vs. INCOME TAX OFFICER WARD-3 , RAICHUR

O R D E R

PER SHRI PAVAN KUMAR GADALE, JM :

. Out of above grounds, the ld. AR has pressed only Ground of Appeal Nos.14 & 15 and hence other grounds of appeal are treated as not pressed and withdrawn and dismissed, the effective grounds of appeal are as under : “14. The learned CIT (Appeals) was not justified in appreciating that where estimation was resorted to, there could be no further additions in the case of the appellant, on the facts and circumstances of the case.

15. Without prejudice, if the estimation resorted is correct, it would draw an inference of rejection of the books and no additions were called for over and above the estimated income, on the facts and circumstances of the case.”

3. The Brief facts of the case are that the assessee is PWD Contractor and has income from execution of contract works with State Government Department and filed the Return of Income for the Assessment Year 2008-09 on 16.09.2008 with total income of Rs.2,42,640 and the Return of Income was processed under Section 143(1) of the Act. Subsequently, Notices under Section 143(2) and 142(1) were issued and summons. The learned Authorised Representative appeared before the Assessing Officer and the case was discussed. The Assessing Officer on perusal of the financial statements found that the assessee has turnover of Rs.48,52,739 and 8% of gross receipts as per Section 44AD of the Act, no books of accounts maintained. In the present financial year, the assessee has sold the two tippers of Hot Mix Plant and Agriculture lands for repayment of Bank loan and no clarification/document were submitted. The Assessing Officer received letter from the Bank in respect of granting of loan for purchase of car and Hot Mix Plant. Assessing Officer on perusal of the Bank statement find repayment of loan of Rs.14,50,000 on 2.9.2007 which include principle of Rs.11,29,008 and interest of Rs.3,20,992 and the assessee ;could not explain the cash transactions of repayment to Bank and the assessee is in the contract business from the earlier year. Hence the Assessing Officer called for the confirmation of outstanding balances in Sundry Creditors amount of Rs.45,00,995 as on 31.03.2008 and it was explained that the balances in Sundry Creditors amount to the extent of Rs.29,95,711 was brought forward from F.Y. 2005-06. The assessee has estimated income in earlier assessment year 2007-08 from direct business. Hence the Balance Sheet was not prepared, where in the present assessment the assessee has filed Balance Sheet and produced Books of Accounts. Since no details were submitted in respect of Sundry Creditors by the assessee, the Assessing Officer made addition of Rs.45,00,995 and with the other additions and assessed the total income of Rs.63,39,214 under Section 143(3) dt.27.12.2010. Aggrieved by the assessment order, the assessee filed appeal with the CIT (Appeals). In the appellate proceedings the assessee could not reconcile the cash balances for repayment of bank loan and has not pressed this disputed issue dealt by CIT (Appeals) at page 4 para 4.3 and was dismissed. Whereas in respect of addition made on unexplained Sundry Creditors of Rs.45,00,995 - the assessee submitted that loans are obtained from friends and relatives and CIT (Appeals) dealt at page 5 para 5.2 of the order where the assessee has not submitted the information even before appellate authority and confirmed the addition and partly allowed the appeal. Aggrieved by the CIT (Appeals) order, the assessee has filed an appeal before the Tribunal.

4. In the hearing, the learned Authorised Representative submitted that the assessee has estimated the income under provisions of Section 44AD of the Act and hence no adtion of balance of Sundry Creditors can be made and relied on the judicial decisions. Further Sundry Creditors balances includes the opening Asst. Year 2006-07 and the provisions of Sec. 68 of the Act does not apply and Sundry Creditors represent loan from friends, relatives and partieswho supplied, opening balance brought forward from earlier years and further submitted that income is estimated, no addition shall be made and prayed for allowing the appeal. Contra, the learned Departmental Representative relied on the orders of the CIT(Appeals) and decisions and also objected to the submissions of the ld. AR.

5. We heard the rival contentions and perused the material on record. The sole disputed issue envisaged by the ld. AR in respect of addition of outstanding balance of Sundry Creditors where the assessee has offered the income on estimated basis applying the provisions of Section 44AD of the Act. The contention of the ld. AR that the CIT(Appeals) has over looked the fact that the assessee has obtained the loan from friends, relatives and took time to produce parties with documentary evidence. In the assessment proceedings, it was brought to the knowledge of the Assessing Officer that Sundry Creditor also include carry forward balance of earlier year and Asst. Year 2006-07. Whereas the Assessing Officer has made addition of the opening balances and cannot be treated as cash credit in the previous year. We find strength in the submissions of the learned Authorised Representative and we consider it proper refer to the provisions of Section 68 which read as under : 68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income- tax as the income of the assessee of that previous year : Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless— (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB)of section 10.