2014 (12) TMI 1283 - AT - Income Tax

Appeal granted in tax case, gross profit rate reduced, delay condoned, pawning income upheld.

The Tribunal partially allowed the appeal by reducing the gross profit rate and deleting the addition of initial investment in undisclosed business ... Trading addition - GP determination - rejection of books of accounts - Held that:- There is no dispute that the assessee in his statement dated November 4, 2011 has categorically admitted that the bank account with State Bank of India, Sakti bearing Account No. 10800468872, was not disclosed to the Revenue. As per the said account, there were voluminous transactions during the year under consideration. It is also apparent from the record that the assessee himself accepted the credits in the bank account aggregating to ₹ 89,58,650 as turnover from sale of steel rods and debits and purchase and other expenses. There is no material on record to controvert the findings given by the lower authorities. Thus there is substance in the alternative submission of assessee and, therefore, we hold that the gross profit rate of 8 per cent. appears to be on the higher side. Keeping in view the entire facts and circumstances of the present case, ends of justice will meet in this case if the gross profit rate is restricted to 7 per cent. as against gross profit of 8 per cent. confirmed by the learned Commissioner of Income-tax (Appeals). Addition on account of initial investment - Held that:- In the instant case the gross profit rate has been applied after rejecting the book result and, therefore, no separate addition of ₹ 5,00,000 is called for in respect of purchase and introduction of cash. Shri Sameer Singh, learned counsel for the assessee also referred to the decision in the case of CIT v. Banwari Lal Banshidhar [1997 (5) TMI 37 - ALLAHABAD High Court] wherein it was observed that (page 232) ' when the gross profit rate is applied, that would take care of everything and there was no need for the Assessing Officer to make scrutiny of the amount incurred on the purchases by the assessee'. In view of the above decisions, we are of the view that the addition made by the Assessing Officer and confirmed by the learned Commissioner of Income-tax (Appeals) is unwarranted and uncalled for. Accordingly, we delete the addition deposited in the bank account on April 8, 2008. Issues:1. Condonation of delay in filing the appeal.2. Addition of income from pawning business.3. Addition of initial investment in undisclosed business activities.Condonation of Delay:The assessee filed a stay application for recovery of outstanding demand. The appeal was late by 25 days due to the assessee's illness. The Tribunal, considering sufficient cause, condoned the delay, emphasizing the need for liberal exercise in such matters.Addition of Income from Pawning Business:The Assessing Officer added Rs. 7,12,671 to the income of the individual assessee from pawning business, citing undisclosed trading in steel rods. The Commissioner of Income-tax (Appeals) upheld this addition, emphasizing the duty of the assessee to substantiate the return and disclose all material facts. The Tribunal, after review, reduced the gross profit rate from 8% to 7%, finding the initial rate on the higher side.Addition of Initial Investment:The Assessing Officer added Rs. 5,00,000 as unexplained investment in undisclosed business activities. The Commissioner of Income-tax (Appeals) upheld this addition. The Tribunal, referencing legal precedents, concluded that the gross profit rate already applied covered the aspects of purchase and cash introduction, thus deleting the additional Rs. 5,00,000 from the assessment.The Tribunal allowed the appeal partly, reducing the gross profit rate and deleting the addition of initial investment. The stay application was dismissed as infructuous.