TaxTMI 
TaxTMI 
TaxTMI 
2017 (3) TMI 952
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....aw on the subject, the Learned CIT-(A)-I Surat erred in restricting the addition to the tune of Rs. 5,85,530/- as against the addition made by the A.O. to the tune of [2] On the facts and in the circumstances of the case, as well as law on the subject, the Learned CIT- (A) -I Surat erred in making addition of G.P. of Rs. 1,68,605/- @ 10.114 by adopting Average GP rate of last three years and further added Rs. 4,16,925/- being seed capital by taking three months average sales without any cogent evidence. [3]On the facts and in the circumstances of the case, as well as law on the subject, the learned CIT- (A) -I, Surat failed in appreciating the facts of the case and submission filed before him favorably. Your appellant therefore prays that looking to the facts and circumstances of the case, the addition made by the learned Assessing Officer as well as confirmed by the CIT(A)-I, Surat may please be deleted. Your appellant further reserves his right to add, alter or to amend any of the aforesaid grounds at the time of hearing o^ an appeal. 3. Briefly stated facts are that assessee is an individual engaged in the business of manufacturing jari. Return of income was filed on 24.03.....
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....pt of peak theory is applied only if deposits are made out of withdrawals. 12.2 In this case, deposits are outside Surat while withdrawals are in Surat. Therefore, peak theory is not accepted and rejected. 12.3 However, during the hearing applicant was asked why the cash deposits should not be taken as Unaccounted sales of appellant for the reason that there is no evidence of funds of HUF or business by HUF. Appellant was also asked why seed capital for unaccounted sales and Gross Profit on unaccounted sales should not be estimated in place of addition of Rs. 16.67.704/- The assessing Officer was also asked the same question. 12,4 The appellant reiterated its submission. However, the assessing officer said that GP of 10.11 % ( average GP of three years ) and seed capital of 4, 16,925/- i.e. taking three months average sales (16,67,704/-/4) may be considered in place of addition of Rs. 1j^67JJ704Mn case departments stand of addition of 16,67,704/- is not upheld. 12.5 Considering facts of the case , following addition is substituted in place of addition of Rs. 16, 67, 704/- gross profit @ 10.11% on Rs. 16,67.704/- Rs.1,68,605/- Seed Capital 1/4th of Rs. 16,67,704/- Rs. 4.16.9....
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....ssing Officer. Ld. Commissioner of Income Tax(A) sustained the addition by bifurcating them in two parts of which Rs. 1,68,605/-/- was calculated by applying gross profit @ 10.11% by treating it to be a business receipt and substituted the addition of Rs. 4,16,925/- by treating it to be seed capital calculated @ 25% of Rs. 16,69,457/-. Ld. Authorised Representative during the course of hearing before us conceded to the gross profit addition of Rs. 1,68,605/- but challenged the calculation of seed capital being on a very higher side. 10. We find that seed capital is the initial capital used when starting a business and often coming from the founder's personal assets for covering initial operating expense and capital. This type of funding is often obtained in exchange for an equity stake in the enterprise although with less formal contractual overhead than standard equity financing. Also the business owner's skill business capabilities and track record along with product or services help to determine how much seed capital should be contributed for a starter. In our view the seed capital mainly relates to capital required for initial start of the business. In the given case assessee ....
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....ained the addition of Rs. 5,85,530/- as against Rs. 16,69,457/-. Ld. Assessing Officer initiated penalty proceedings at the time of framing assessment u/s 143(3) of the Act and post ld. Commissioner of Income Tax(A)'s order passed the penalty order on 19.3.2014 imposing penalty of Rs. 1,67,875/- u/s 271(1)(c) of the Act by observing that assessee has acted deliberately in defiance of law with guilty of conduct, contumacious as well as acted in conscious disregards to its obligation and concealed the income of Rs. 5,85,530/- in the form of undisclosed cash/cheques deposits in undisclosed bank account. Against the impugned order u/s 271(1)(c) of the Act assessee could not get any relief in appeal before ld. Commissioner of Income Tax(A). 13. Aggrieved, assessee is now in appeal before the Tribunal. Ld. Authorised Representative for the assessee reiterated the submissions made before ld. Commissioner of Income Tax(A) and ld. Departmental Representative supported the orders of both the lower authorities. 14. We have heard the rival contentions and perused the record before us. The issue raised in this appeal is against the order of ld. Commissioner of Income Tax(A) confirming the pen....
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....de by cash and Id, CIT(A) by adopting lenient approach sustained the addition only for seed capital and profit amount. The contention of the assessee that such fund belong to HUF is not found tenable. Nevertheless, the onus of explaining the deposit is on the assessee especially when assessee wants to claim the source belong to some other person. The assessee failed to satisfactory explain the source. If the source of deposit was from disclosed sources then the .assessee should have filed the evidences and established the nexus. In appellate proceedings and that too against penalty order, the appellant cannot be allowed to agitate the issue on altogether on new ground. It is true that fevy of penalty is not automatic and assessment & penalty proceedings are separate but the findings of assessment proceedings could not be brushed aside and the same could very well be used in penalty proceedings. In this case, the addition was not made merely because of operation of deeming provision but for the fact that the cash amount was actually found deposited in the Bank A/c which belongs to him. In a recent decision, Hon'ble Madras High Court in the case of S. Satyanaraynan Vs. ACIT (2014....