2018 (7) TMI 872 - AT - Income Tax

Tribunal upholds 15% gross profit addition on unaccounted purchases, directs rework of peak credit balance.

The Tribunal directed the A.O. to rework the peak credit balance in the ICICI Bank account and upheld the 15% gross profit addition on unaccounted ... Addition made towards unexplained sources for peak credits in ICICI Bank Account but not disclosed in the books of accounts - Held that:- As observed from the order of the Ld. CIT(A), there is credit for closure of deposits made in the account on 5.3.2007 which was also included for arriving the peak balance. It is not explained whether the sources of deposits were disclosed or not in the regular books of accounts. Therefore, while confirming the action of the Assessing officer for making the addition of peak credit balance, we direct the A.O. to work out the peak credit balance correctly, taking into the account of the cash deposits, cash withdrawals and the unexplained undisclosed entries in the bank account - remit the issue back to the file of the A.O. to rework the peak credit balance correctly. Appeal of the revenue on this ground is allowed for statistical purposes. Gross profit addition on unaccounted purchases - CIT(A) restricted the addition to 15% of gross profit - Held that:- A.O. has not brought on record any comparable cases of others or the assessee’s own case in the earlier years for resorting for estimation of income @ 40.25%. Whereas, the CIT(A) has considered the comparable cases and observed that the rate of gross profit from copra was ranging from 4.68% to 13.25% in regular cases where the purchases and sales were accounted and accordingly, sustained gross profit estimation @ 15% of unaccounted purchases. No other evidence was brought on record by the D.R. and the A.R. to controvert the finding given by the Ld. CIT(A) to establish that the income from unaccounted purchases is less than 15%. No reason to interfere with the order of the Ld. CIT(A) and dismiss the appeal of the revenue as well as the cross objection of the assessee on this issue. Issues:1. Addition towards unexplained sources for peak credits in ICICI Bank Account.2. Gross profit addition on unaccounted purchases.Analysis:Issue 1: Addition towards unexplained sources for peak credits in ICICI Bank Account:- The appeal was against the order of the Commissioner of Income Tax (Appeals) regarding the assessment year 2007-08.- The Assessing Officer (A.O.) found unexplained cash deposits in the ICICI Bank account not disclosed in books of accounts.- The A.O. assessed the peak credits at Rs. 50,89,252 as income under 'unexplained sources.'- The CIT(A) upheld an addition of Rs. 5 lakhs instead of the A.O.'s amount.- The revenue appealed, arguing for the higher amount based on cash deposits totaling Rs. 73,88,902.- The AR contended that the correct peak credit balance was Rs. 5 lakhs, considering all debits and credits in the account.- The Tribunal found the transactions to be unaccounted for and directed the A.O. to rework the peak credit balance, considering all cash deposits, withdrawals, and undisclosed entries.Issue 2: Gross profit addition on unaccounted purchases:- The A.O. estimated gross profit at 40.25% on unaccounted purchases of Rs. 60,86,864.- The CIT(A) reduced the addition to 15% of gross profit, amounting to Rs. 9,39,029.- The revenue appealed for the higher estimation, citing lack of evidence for lower profit.- The AR argued for a more reasonable profit estimation.- The Tribunal noted the lack of evidence supporting the higher estimation and upheld the CIT(A)'s decision to maintain the 15% gross profit addition.- Both the revenue's appeal and the assessee's cross objection were partly allowed for statistical purposes.In conclusion, the Tribunal directed the A.O. to rework the peak credit balance in the ICICI Bank account and upheld the 15% gross profit addition on unaccounted purchases, dismissing the appeals and cross objections accordingly.