AI Drafter 
TaxTMI 
TaxTMI 
2018 (3) TMI 892
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....ture of business and the Assessee purchased the material from such person in unorganized sectors. "Ground No. 2 The Ld. CIT (A) ignored the fact that the Appellant had satisfactorily explained the Creditors by way of Affidavits and Confirmation of balances." Whereas in the revenue's appeal, the department has raised the following grounds:- 1. "The Ld. CIT(A) has erred in law and on facts in restricting the addition made by the AO on account of bogus creditors to Rs. 1,34,22,499/- as against Rs. 1,71,03,987/- made by the AO. 2. The Ld. CIT (A) has erred in law in deleting the addition of Rs. 81 lacs made by the AO on account of unsecured loan." 2. The facts in brief are that assessee is a civil contractor and engaged in the executing of road projects like Government Road Construction Department No. 1, RSVY Project Division CPWD Rural Engineering Services Deoria, U.P. Road Division Chaibasa, NHPC Ltd. Motihari, Bihar, PACL LTD. The entire contract receipts were duly reconciled from "Form 26AS" also which reflects gross receipts at Rs. 47,68,80,785/-. The Ld. AO from the perusal of the balance sheet noted that assessee has shown 'trade credito....
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....rs with the amount outstanding alongwith their addresses and other details, list of which has been given at page 6 of the appellate order. Similarly with regard to unsecured loans, copy of ITR of the said person alongwith the PAN details was given which was submitted that the same may be treated as additional evidence. Assessee's detailed submissions and evidences were forwarded to the AO to submit a remand report, the content of which has been incorporated in the appellate order on pages 9 and 10. Ld. CIT (A) after considering the entire facts and material on record and the remand report, accepted the outstanding amount in respect of four sundry creditors only and for other 19 sundry creditors who were small suppliers of sand, bazri, soil, etc., for which assessee could not file confirmation, he did not accept the amount outstanding against them aggregating to Rs. 1,34,22,499/- The details of such persons have been incorporated at page 12 and 13 of the appellate order. Thus, the only part relief was given out of total addition of Rs. 1,71,03,987/- and balance amount of Rs. 1,34,22,499/- was upheld. 4. Regarding addition on account of unexplained amount of Rs. 81 lacs received f....
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....so the application of net profit rate of 8%, but the accepted claim of depreciation after applying the said rate after discussing various judgments on allowability of depreciation post applying net profit rate. However he held that, since already addition on account of inflated sundry creditors to the tune of Rs. 1,34,22,499/- has already been upheld by him, therefore, separate addition by applying the net profit is not justified. 6. After hearing both the parties and on perusal on the material placed on record, we find that there is no dispute with regard to the total turnover from the gross contract receipt declared at Rs. 47,68,80,785/-. The said turnover is also verifiable from form No. 26AS which has been placed on the paper book from pages 54 to 57. Ld. AO has firstly, made the addition by disallowing part of the outstanding amount under the head 'trade creditors' shown at Rs. 3,88,68,131/- and thereby made addition of Rs. 1,71,03,987/- on the ground that assessee could not furnish the confirmation in respect of 23 parties; secondly, after making the said addition, AO further went to reject the assessee's books of accounts after invoking provision of section 145(3) on the ....
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....held by the Ld. CIT (A) after allowing depreciation. Once that is so, then no further addition should be made to the income of the assessee. 7. So far as rejection of books of accounts are concerned the Ld. Counsel has not placed any objection which inter alia leads to an inference that books of accounts have rightly been rejected by the authorities below alongwith the application of net profit rate of 8%. Once the trading results and books of accounts have been rejected and income is being estimated by applying net profit rate on the declared gross contract receipt, then no other addition is required to be made on account of any other trading items including the trade creditors or any other direct expenses as well as trading liabilities shown in the accounts. The reason being that, when the books of accounts are rejected and income is assessed on the principle of 'best judgment assessment', then entries of the amounts shown in the books of accounts cannot be held to be reliable. Once business income of the assessee from the contract receipt business has been assessed at 8%, then it take cares of all other additions made on account of trading account and any liability including ....