2016 (9) TMI 594 - AT - Income Tax

Appeal Dismissed in ITA No.1906/Kol/2009, Others Partially Allowed, Recomputation Ordered

The appeal in ITA No.1906/Kol/2009 was dismissed, while the remaining appeals were allowed in part. The Tribunal directed the Assessing Officer to ... Addition on account of sale of gold/silver jewellery - Held that:- Assessee, in the instant case, failed to produce documents regarding the purchase / possession of silver and gold ornaments. In the absence of supporting evidence, it is inferred that assessee was having undisclosed income which was accounted in the form of sale purchase of gold and silver. We find that there is no substance in the transactions as claimed by assessee. Accordingly, we find no reason to interfere in the order of Authorities Below. We uphold accordingly and ground raised by assessee is dismissed. Addition on account of unexplained income - Held that:- We find that assessee failed to furnish any documents in support of gift received from the above stated parties. In the absence any documentary evidence, we find no reason to interfere in the order of Ld. CIT(A). Estimating a profit @ 7% on the turnover - Held that:- Nature of business of assessee has not been doubted by the lower authorities. We understand that if assessee is carrying on his business, there will be several indirect business expenses besides the direct cost. The lower authorities have not doubted the amount of loan which assessee has borrowed for the purpose of his smooth running of business. If we analysis the balance-sheet of assessee we find that loan amount has been utilized exclusive for the business. However, at the same time, we cannot ignore the fact that assessee has failed to produce his books of account which was very important aspect for making the scrutiny assessment. We find that assessee has claimed total indirect expense for ₹2,77,086/- which is inclusive of interest element of ₹1,58,833/-. So it means only indirect expense of ₹1,18,253/- has been claimed by assessee. In view of the mater and after considering the facts in totality of the case and in the interest of justice and fair play, we are inclined to limit the net profit @ 4% of assessee’s turnover. Issues Involved:1. Whether the assessment completed u/s 143(1) can be considered in assessment proceedings u/s 153A without finding any incriminating materials during search.2. Addition of Rs. 2,74,664/- on account of sale of gold/silver jewellery.3. Addition of Rs. 2,40,000/- as unexplained income from gifts.4. Estimation of higher profit on turnover by the AO and CIT(A).5. Application of provisions of section 44AD for turnover exceeding Rs. 40 lakhs.Detailed Analysis:Issue 1: Assessment under Section 153A without Incriminating Materials- The assessee raised the issue of whether assessments completed under section 143(1) can be reopened under section 153A without any incriminating materials found during the search.- Both parties presented arguments and case laws, but the assessee expressed willingness to withdraw this issue.- The Tribunal dismissed this ground as not pressed.Issue 2: Addition of Rs. 2,74,664/- for Sale of Gold/Silver Jewellery- The assessee declared income from the sale of silver utensils and gold ornaments, claiming these were purchased before AY 1981-82 and disclosed under VDIS 1997.- The AO added Rs. 2,74,668/- to the income due to the absence of documentary evidence supporting the purchase/possession of these ornaments.- The CIT(A) upheld the AO’s decision, noting the lack of VDIS 97 certificate and supporting documents.- The Tribunal found no reason to interfere with the CIT(A)'s order and dismissed the assessee's appeal on this ground.Issue 3: Addition of Rs. 2,40,000/- as Unexplained Income from Gifts- The assessee claimed to have received gifts totaling Rs. 2,40,000/- from three individuals.- The AO disallowed these gifts due to the lack of substantiating documents.- The CIT(A) upheld the AO’s decision, noting that confirmations from the donors were not provided.- The Tribunal agreed with the CIT(A) and dismissed the appeal on this ground.Issue 4: Estimation of Higher Profit on Turnover- For AY 00-01, the AO estimated a profit of 12% on the turnover due to fluctuating GP ratios and absence of books of accounts, while the CIT(A) reduced it to 7%.- The Tribunal found that the assessee’s loss was due to interest expenses on loans used for business and limited the net profit estimation to 4% of the turnover.- For AYs 03-04 and 05-06, similar issues were raised, and the Tribunal applied consistent reasoning, allowing the appeals in part and directing the AO accordingly.Issue 5: Application of Section 44AD for Turnover Exceeding Rs. 40 Lakhs- For AY 02-03, the AO applied an 8% profit rate under section 44AD, which is applicable for turnovers up to Rs. 40 lakhs.- The CIT(A) confirmed this, but the Tribunal noted that section 44AD should not apply to turnovers exceeding Rs. 40 lakhs.- The Tribunal restricted the net profit estimation to 6%, considering it reasonable and avoiding further litigation.General Grounds:- General grounds raised in various appeals were found to be non-specific and did not require separate adjudication.Conclusion:- The appeal for ITA No.1906/Kol/2009 was dismissed.- The remaining appeals were allowed in part, with directions to the AO for re-computation based on the Tribunal’s findings.Order Pronounced:- The order was pronounced in the open court on 03/08/2016.