ITO- 3(3), BIJNOR vs. SHRI ABDUL SAMI, BIJNOR

This appeal by the Revenue is preferred against the order of the Commissioner of Income Tax [Appeals], Moradabad dated 04.03.2015 pertaining to A.Y 2010-11.

The only grievance of the Revenue is that the ld. CIT(A) erred in law to reduce bank unexplained credits Rs. 66,97,038/- to 3% i.e. 2,00,911/-, allowing relief of Rs. 64,96,127/-.

None appeared on behalf of the assessee. We heard the ld. DR at length and have carefully perused the orders of the authorities below.

Briefly stated, the facts of the case are that the assessee is engaged in civil construction work on contract. Return of income was filed electronically on 15.10.2010 showing total income of Rs. 5,05,289/-. Return was selected for scrutiny assessment through CASS and accordingly, statutory notices were issued and served upon the assessee.

During the course of scrutiny assessment proceedings, the assessee was asked to furnish details in respect of its contract receipts. On receiving no plausible reply, the officer proceeded by issuing notice u/s 133(6) of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short] calling for information from number of persons. The Assessing Officer found that the many irreconcilable discrepancies remained to be explained. The discrepancies were in the gross amount of payments made by various government agencies which have been credited to the profit and loss account vis a vis the tax deducted by the payers. The Assessing Officer was of the opinion that these differences have direct bearing on the final accounts.

The Assessing Officer further found that there was difference in gross receipts as per profit and loss account and bank accounts. The Assessing Officer was of the firm belief that the gross receipts credited to the profit and loss account should be the total of credits found in the bank accounts plus various items of receivable nature shown/not shown in the balance sheet. Since the assessee has already debited all the expenses incurred by him for business, the Assessing Officer treated the difference of Rs. 85,93,227/- as net profit and added the same to the total income of the assessee.

The assessee carried the matter before the ld. CIT(A) and contended that the Assessing Officer has computed the net profit @ 3% on agreed basis on receipts shown/credited in the profit and loss account at Rs. 4,62,93,261/-. Therefore, any further addition by the Assessing Officer is uncalled for.

After considering the facts and submissions, the ld. CIT(A) was convinced with the contention of the assessee and held as under:

The ld. CIT(A) further held as under:

Before us, the ld. DR strongly supported the findings of the Assessing Officer. It is the say of the ld. DR that addition has been made over and above the profit estimated on gross receipts of the assessee. Therefore, the ld. CIT(A) erred in deleting the addition.

There is no dispute that the Assessing Officer in his assessment order has proceeded by estimating net profit because the assessee did not furnish necessary details. It is true that if the assessee does not furnish necessary details in respect of its income, the Assessing Officer is left with no choice but to estimate the net profit of the assessee. In our considered opinion, once the profit if estimated on gross receipts, no further addition needs to be made on this count. Moreover, the assessee, before the first appellate authority, has successfully explained the amount found deposited in the bank accounts over and above the deposit of contract receipts and the ld. CIT(A) has given a factual finding in this respect. The ld. DR could not point out any error or infirmity in the factual findings of the first appellate authority. Therefore, no interference is called for.

In the result, the appeal of the Revenue in is dismissed.