TaxTMI 
TaxTMI 
2016 (6) TMI 937
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....that the appellant had not offered any satisfactory explanation for fall in net profit rate. 4. On the facts and circumstances of the case, the Ld. CIT (A) has erred in not appreciating the fact that the accepted net profit rate in the case of contractors u/s 44AD of the Income tax act, 1961 in the relevant assessment year is 8% and the appellant's net profit rate is 8.43%. 5. On the facts and circumstances of the case, the Ld. CIT (A) has erred in sustaining the net profit rate at 10.78% adopted by the Ld. A.O. in spite of the fact that; a) No discrepancy is pointed in the books of accounts b) No expenses are alleged to be bogus. c) No receipts are alleged to have been concealed. 6. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in sustaining the addition of Rs. 19.50,000.00 u/s 69 of the Income tax Act. 1961. 7. That on the facts and circumstances of the case, the authorities below have erred in not considering the revised computation of net income submitted along with statement of accounts of new business on 16.12.2010 the date fixed as per the show cause notice dated 09.12.2010. 8....
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.... the ld. CIT(A) who sustained the addition made by the AO. Now the assessee is further aggrieve d and has come in appeal before the Tribunal. 5. Before us, the ld. AR reiterated the submissions made before the authorities and relied on the written synopsis filed on record and submitted that the above reasoning of the AO was incorrect for the following reasons: (i) Under Section 44AD of IT Act for assessment of contracts 8% is an acceptable net profit rate. Net profit rate of assessee for the year was 8.3%. (ii) AO has not doubted the expenses or pointed any discrepancy in the books. (iii) The AO did not resort to section 145 of the Act. (iv) AO is wrong in stating that no explanation was offered because of which she resorted to average net profit rate of three years. Last para of letter dated 16.12.2010 (pages 24 to 26) gives the reason for the fall in NP: "The reason for fall in N. P. is attributable to the fact that the assessee maintains account on cash system. In this system it is possible that expenses have been incurred on a particular work order but the payment has not been received till 31.03.2008 and is received after 31.032008 thus falling into the....
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.... assessee's explanation vide order dated 16.12.2010 as follows: "The reason for fall in N.P. is attributable to the fact that the assessee maintains accounts on cash system. In this system it is possible that expenses have been incurred on a particular work order but the payment has not been received till 31.3.2008 and is received after 31.3.2008 thus falling into the subsequent year. Further also, because of cut throat competition, the assessee had to cut down the margin of profit." 9. In view of the above explanation of the assessee for reduction of N.P. rate is that the assessee follows cash system of accounting, wherein it is possible that expenses have been incurred on a particular work but the payment has not been received till 31.3.2008 and actually received and accounted as revenue after 31.3.2008 during the next financial period which resulted in to increase in N.P. rate for A.Y 2009-10 to 10.19% of turnover. The assessee also explained that he operates from his residence and due to cut throat competition, the N.P. reduced during the relevant period, above explanation has not been controverted by the AO or by the co and thus their findings are not sustainable. ....
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....ding in electrical parts. The additional tax liability on this amount has been paid off. Photocopy of the deposit slip for Rs. 90,620.00 is enclosed. The aforesaid information has been given by the assessee suo-moto and before any detection by the department. The deposit of Rs./9,50,000.00 into the ICICI Bank bearing no. 629701502290 is out of this business. The deposits are out of cash in hand in the books." 12. The ld. AR further contended that the assessee having explained the source of deposit cash of Rs. 19,50,000/- into the ICICI Bank to be out of cash in hand in the books, the addition was unsustainable on facts and law without examining the supporting vouchers produced by the assessee in assessment proceedings dated 16.12.2010 and in remand proceeding dated 09.01.2012. No questions were asked by the AO and these letters along with enclosures were just put on record. Appellant was under bonafide belief as he was not familiar with tax laws that the part time accountant had taken such trading income also. The fact that this was not taken into account was discovered during assessment and assessee filed revised computation (pages 19 to 22 of assessee's paper book) before asse....
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....o peak balance. 14. The ld. DR supported the action of the AO. However, he pointed out that if addition is restricted to peak balance, then department has not serious objection to that. On careful consideration of the above, we have no hesitation to hold that the assessee could not establish that the cash deposits to ICICI Bank was from the cash in hand of new business of the assessee and no details of cash book and cash flow has been furnished. However, we are in agreement with the contention of the ld. AR and agreed by the ld. DR that in these set of facts and circumstances of the case, only peak balance can be taken for making addition and we order accordingly. Consequently, Ground No. 2 of the assessee is allowed on alternative prayer of the assessee and thus the AO is directed to take peak balance of deposits for making addition u/s 69 of the Act. 15. Last ground No. 10 relates to the disallowance of short and excess expenses amounting to Rs. 2,67,234/-. 16. Before us, the ld. AR submitted that the term short and excess means any amount small / less received or paid in the day to day course of business which is debited / credited under this account, copy of short and ....