TaxTMI 
TaxTMI 
2012 (9) TMI 41
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....tion on account payment and ground No.12 which is regarding charging of interest under section 234A, 234B and 234C. The other 10 grounds raised by the assessee are, therefore, dismissed as not pressed. 2.1 Ground No.5 is regarding addition on account of cash payments of Rs.8.50 lacs. A survey under section 133A had been conducted in case of the assessee in which an executive diary was found from the possession of Shri Jayakar S. Shetty in which entries for cash payments were found recorded aggregating to Rs.50.00 lacs. The AO noted that during the assessment year 1998-99, the issue of cash payments of Rs.50.00 lacs had been examined in detail. The AO in that year had examined 4 persons from whom assessee had claimed to have received cash loans. The assessee had also filed letters from 4 persons stating that they had advanced cash loans to the assessee on various dates. In assessment year 1998-99, the AO had not accepted the explanation given and had added a sum of Rs.41.5 lacs. The payment pertaining to this year was Rs.8.5 lacs. The assessee during the assessment proceedings for this year filed letter from Shri B.K. Sheena in which it was confirmed that he had given a loan of R....
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....that he was pressing only the addition of Rs.5.00 lacs which had been explained by the assessee as loan taken from Shri B.K. Sheena. It was pointed out that Shri B.K. Sheena had confirmed giving his P.A. Number and, therefore, even if party was not produced, AO was not justified in making addition without making verification from assessment records. It was also submitted that claim of loan was genuine and, addition could not be made only on the ground that the loan had been taken in cash and payment had been made much later. It was also submitted that he had no objection if the matter was referred to AO for fresh verification on this point. Ld. DR placed reliance on the orders of authorities below and had no objection if the matter was restored to the file of AO. 2.4 We have perused the records and considered the rival contentions carefully. The assessee has pressed only addition of Rs.5.00 lacs and, therefore, the balance addition of Rs. 3.50 lacs is confirmed. As regards addition of Rs.5.00 lacs, we find that the assessee had explained the same as cash loans taken from Shri B.K. Sheena during April, 1998, which has also been confirmed by him giving his Permanent Account Num....
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....ent year 2003-04 did not arise. 3.2.1 The assessee during assessment proceedings submitted that P&L Account found at the time of survey was purely provisional and subsequently books had been audited and as per audited accounts, net profit was Rs.12,46,507/-. The AO however, did not accept the contentions raised. It was observed by him that the assessee had not produced books of account and all relevant details. The AO also did not accept the claim of the assessee that the chief accountant was missing. The AO noted that the assessee was a trader and as per impounded papers being the trading cum Profit and Loss account, total turnover was Rs.12,32,40,000/- on which net profit had been shown at Rs.18,73,200/- @ 1.52%. The AO did not accept such low net profit rate considering nature of business. He, estimated net profit @ 8% as provided in Section 44AD and thus assessed income from business at Rs.98,59,200/-. 3.2.2 The assessee disputed the decision of AO and submitted before CIT(A) that the additional income disclosed at the time of survey was conditional as was clear from ques.No.20. The assessee had subsequently retracted from the statement vide letter dated 8.1.2003 as there....
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....02 was around @ 2% and in assessment year 2002-03 there was net loss whereas net profit declared by the assessee for assessment year 2003-04 was @ 4.45% . It was accordingly requested that the net profit declared should be accepted. The ld. Departmental Representative on the other hand argued that in the absence of books of accounts, turnover declared in P&L Account could not be accepted and profit had been rightly accepted as per documents found at the time of survey. It was also submitted that estimation of net profit @ 8% was very reasonable. 3.2.4 We have perused the records and considered the rival contentions carefully. The dispute is regarding estimated addition made by AO. The assessee is a contractor and had returned net profit of Rs.12.46 lacs on a turnover of Rs.2.80 crores. A survey under section 133A in this case had been conducted on 31.10.2002 during the course of which P&L account had been found showing turnover of Rs.12.34 crores and net profit of Rs.18,73,200/- @ 1.52%. The assessee in response to Ques.No.19 at the time of survey had declared additional income of Rs.30.00 lacs over and above the normal profit for discrepancy in labour charges and purchases for ....
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....of any discrepancy in labour charges and purchases. 3.2.6. We agree with the submission of ld. AR that estimation can not be made @8% under section 44AD which is applicable only in case of turnover not exceeding Rs.40.00 lacs. In the present case, turnover is Rs.2.80 crores. The ld. AR has submitted that net profit during assessment years 1998-99 to 2001-02 was around 2% and, therefore, net profit of 4.45% declared by the assessee should be accepted. The very fact that the assessee has shown net profit of 4.45% this year compared to 2% declared in assessment year 1998-99 to 2001-02 and loss in assessment year 2002-03, indicates that any comparison with the past is not reliable. The books of account for this year are not available and, therefore labour charges and purchases can not be cross verified. No comparative case for the current period has been brought to our notice in support of the case. Once the books of account are not available, burden is on the assessee to produce material to support the net profit rate declared. Considering the facts and circumstances of the case, in our view, it would be reasonable to estimate net profit @ 6% this year. We hold accordingly. 4....