Assessee's 7.5% profit estimation on demolished building materials upheld due to inadequate documentation and books

ITAT Rajkot upheld CIT(A)'s estimation of 7.5% profit on sale of demolished building materials (imlo) worth Rs. 6.5 crores, finding the assessee failed to maintain proper books or provide documentary evidence. The tribunal dismissed addition for household expenses citing double taxation concerns since estimated profit was sufficient to cover such expenses. Unexplained bank deposits addition was confirmed due to lack of supporting documentation. Addition for car purchase was deleted as tribunal found sufficient tax-paid income from previous years available for the purchase after adjusting household expenses.

---

---

Issues Involved:

1. Estimation of profit on sale of Imlo.
2. Estimation of household expenditure.
3. Unexplained credits in bank account.
4. Unexplained expenditure incurred from undisclosed sources.

Summary:

1. Estimation of Profit on Sale of Imlo:

The assessee challenged the addition of Rs. 41,55,750/- by estimating a 7.5% profit on the sale of Imlo. The Assessing Officer (AO) initially estimated a 10% profit due to lack of supporting documents, while the CIT(A) reduced it to 7.5% based on the deeming provisions under section 44AD. The Tribunal upheld the CIT(A)'s estimation, stating that the assessee failed to provide a basis for a lower profit rate and did not discharge the onus of proving the income from comparable cases. The Tribunal found the CIT(A)'s estimation reasonable and dismissed the assessee's appeal on this issue.

2. Estimation of Household Expenditure:

The AO estimated the household expenses at Rs. 3 lakh from undisclosed sources, which the CIT(A) reduced to Rs. 1.5 lakh. The Tribunal noted that the assessee had sufficient income from the sale of Imlo to cover household expenses and making a separate addition would lead to double taxation. Therefore, the Tribunal directed the AO to delete the addition, allowing the assessee's appeal on this issue.

3. Unexplained Credits in Bank Account:

For AY 2014-15, the AO treated Rs. 15.17 lakh credited in the assessee's bank account as unexplained, which the CIT(A) confirmed. The Tribunal upheld this addition, stating that the assessee failed to justify the source of the deposits with documentary evidence.

4. Unexplained Expenditure Incurred from Undisclosed Sources:

- AY 2014-15: The AO added Rs. 21.25 lakh for the purchase of a Ford car from unexplained sources, which the CIT(A) confirmed. The Tribunal found that the assessee had sufficient tax-paid income from earlier years to cover this expenditure and directed the deletion of this addition.

- AY 2015-16: The AO added Rs. 41,03,460/- for the purchase of an Audi car from unexplained sources, confirmed by the CIT(A). The Tribunal found that the assessee had Rs. 35.15 lakh of tax-paid income available from earlier years and directed the addition of only the remaining Rs. 5,88,460/- as unexplained expenditure.

Conclusion:

The Tribunal partly allowed the appeals for all the assessment years, confirming some additions while deleting others based on the availability of tax-paid income and the reasonableness of estimations. The orders were pronounced on 29/11/2023 at Ahmedabad.

---