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2015 (4) TMI 90 - AT - Income TaxRejection of books of account and adopting net profit @ 2.50% of sales - Held that:- During the course of assessment proceedings, the assessee admitted that even if there were any defects in the books of account, the sales made by him were fully supported. In the entirety of the above facts and circumstances, where the assessee had failed to maintain proper record and the expenses not being backed by proper details, we hold that the provisions of section 145(3) of the Act are attracted and the book results declared by the assessee cannot be relied upon. After dismissing books of account, next resort was to estimation of income. The assessee during the year under consideration had disclosed turnover of ₹ 1,93,02,933/- on which, it had declared net profit of ₹ 3,00,754/-. The Assessing Officer however, applied NP rate at 2.5% on total sales and computed the income at ₹ 4,82,573/-. We uphold the order of Assessing Officer in this regard - Decided against assessee. Unexplained investment in purchase of land - whether AO erred in adding ₹ 21,30,000/- as income from undisclosed sources representing un-explained investment in the purchase of land at Nandurkhi, which has been confirmed by the CIT(A)- Held that:- We find merit in the plea of the assessee that out of total investment of ₹ 21,30,000/- made during the year under consideration, a sum of ₹ 2,00,000/- has been paid by way of cheque dated 04.04.2008 drawn on Andhra Bank. The balance cheques in the preceding year were also drawn on Andhra Bank which is the business bank account of the assessee, hence, there is no merit in making any addition on account of said payment of ₹ 2,00,000/-. For balance payment perusal of audited financial statements relating to the financial year 2008-09 reflects that the assessee had declared the investment in plot at ₹ 39,00,500/- in its balance sheet as on 31.03.2009. Once the amount has been declared by the assessee in the balance sheet as on 31.03.2009 as investment in the purchase of plot, then investment to that extent merits to be accepted in the hands of the assessee. One point also be clarified herein that the sum of ₹ 2,00,000/- paid by cheque drawn on Andhra Bank, dated 04.04.2008 stands covered in the investment of ₹ 39,00,500/-. The assessee had declared the investment upto ₹ 29,00,000/- in the financial year 2007-08 and the balance of ₹ 10,00,500/- was declared as the investment made during the year under consideration. Accordingly, investment to the extent of ₹ 39,00,500/- merits to be accepted in the hands of the assessee as being made out of declared source of income. Balance investment of ₹ 13,29,500/-. Though the assessee claims that the said investment had been made by his family members and himself out of agricultural income, but except to filing the evidence of 7/12 extract of agricultural land at Shirdi, the assessee has not furnished any evidence as to the quantum of agricultural proceeds received by the assessee in the preceding year or in the year under consideration. In the absence of the same, we find no merit in the claim of the assessee in this regard. The perusal of the assessment order reflects that the assessee had only declared income of ₹ 2,91,150/- and no agricultural income had been offered to tax. In the absence of the same, we find no merit in the plea of the assessee that the balance investment totaling ₹ 13,29,500/- was made out of agricultural income. Additional income assessed in the hands of the assessee under the head ‘income from business’ i.e. ₹ 1,81,819/- being set off against the balance addition made in the hands of the assessee i.e. ₹ 13,29,500/- finds merit. Accordingly, we direct the Assessing Officer to give the benefit of set off of the additional income against the source of investment in the purchase of plot. Accordingly, the addition in the hands of the assessee on account of undisclosed investment in the purchase of plot of land is restricted to ₹ 13,29,500/- - 1,81,819/- = 11,47,681/-. - Decided partly in favour of assessee.
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