2015 (10) TMI 1391 - AT - Income Tax

Estimation of profit at 6 per cent - Held that - Keeping in view the assessee s turnover and the nature of business being transport business, it would meet the ends of justice, if the business income is estimated at 5 per cent. of the turnover of ₹ 1,87,25,469 as against 6 per cent. determined by the Commissioner of Income-tax - Decided partly in favour of assessee. Profit estimated at a flat rate under section 68 - Held that - The hon ble Supreme Court in the case of CIT v. Devi Prasad Vishwanath Prasad 1968 (8) TMI 5 - SUPREME Court has, inter alia, observed that whether in a given case the Income-tax Officer may tax the cash credit entered in the books of account of the business, and at the same time estimate the profit must, however, depend upon the facts of each case. Therefore, the facts have to be examined before arriving at any conclusion. The gross receipts of the assessee were at ₹ 1,87,25,469, 5 per cent. of which will come to ₹ 9,36,273, which is more than the sundry creditors shown at ₹ 8,81,683. Further, since books of account were rejected, the detailed scrutiny of sundry creditors was not done. There is no other source of income earned by the assessee. In view of the above discussion, we are of the opinion that no separate addition is called for in regard to sundry creditors. - Decided in favour of assessee.

Summary

Issues:
- Estimation of business income at a specific percentage.
- Treatment of unexplained credits under section 68 of the Act.

Estimation of Business Income:
The appeal was against an order by the Commissioner of Income-tax (Appeals) for the assessment year 2008-09. The assessee, a firm deriving income from transportation work, initially showed a total income of &8377; 7,13,270. However, the assessment under section 144 resulted in a total income of &8377; 23,69,720. The Commissioner of Income-tax (Appeals) allowed the appeal in part, directing the Assessing Officer to consider business income at 6% of turnover instead of the initial 8% estimated. The Appellate Tribunal, after considering the turnover and nature of the transport business, reduced the estimated business income to 5% of the turnover, amounting to &8377; 9,36,273. This adjustment was made to ensure justice in the assessment.

Treatment of Unexplained Credits:
Regarding the treatment of unexplained credits under section 68 of the Act, the Commissioner of Income-tax (Appeals) confirmed the addition related to sundry creditors, citing precedents such as Sai Construction v. ITO and other cases. The Appellate Tribunal, however, analyzed the facts and legal aspects. Referring to the decision of the Supreme Court in CIT v. Devi Prasad Vishwanath Prasad, it was noted that the Income-tax Officer can tax both unexplained cash credits and estimated business income after rejecting the books of account. In this case, since the gross receipts exceeded the amount of sundry creditors and detailed scrutiny was not conducted due to rejected books of account, no separate addition was deemed necessary. Consequently, the ground related to the treatment of unexplained credits was allowed in favor of the assessee.

In conclusion, the appeal filed by the assessee was partly allowed by the Appellate Tribunal, addressing the issues of estimating business income and the treatment of unexplained credits under section 68 of the Act. The judgment provided detailed reasoning based on legal precedents and factual considerations to arrive at a fair decision in each aspect of the case.