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2014 (5) TMI 1102 - AT - Income TaxDisallowance out of purchases - difference found between the credit entry in the bank account and sale proceeds - Held that:- It is true that without purchase no sale can be executed. The appellant had not produced the books of accounts before the AO, however made available copy of bank account to the AO on which addition had been made. The appellant had shown net profit on sale of ₹ 32.01 lac @ 4.08%. The AO made addition without comparing any case in the similar line of business @ 25% and disallowed the expenses on estimated basis. He made addition on account of difference found between the credit entry in the bank account and sale proceeds shown by the assessee at ₹ 17,31,629/-. The AO has not brought any material on record that the assessee had made purchases outside the books of accounts. The sales included the cost of purchase plus expenses and net profit. Therefore, the whole sale proceeds cannot be added as income of the assessee. As suggested by the ld.counsel for the assessee that 5% on net profit of total credit entries, i.e. ₹ 49,32,992/- be taken as income of the assessee which comes to ₹ 2,46,649/-. The appellant had already disclosed income at ₹ 1,30,757/- and returned income at ₹ 95,114/-. After reducing the amount of returned income, the net addition is worked out at ₹ 1,15,892/-; whereas as per the peak theory of investment, the maximum balance was at ₹ 2,05,643/-. The appellant had not established that all the cash deposited in the bank account came from the sale proceeds of the assessee. In the absence of complete books of accounts, we estimate the assessee’s income for the year under consideration at ₹ 2.05 lacs on the basis of ‘peak’ plus ‘income’ disclosed by the assessee in the return. When assessee’s income has been estimated on the basis of facts, no other addition remained to be justified as held by the various courts on this issue. - Decided partly in favour of assessee
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