2018 (4) TMI 1567 - AT - Income Tax

Gross profit earned on an unaccounted / suppress sales - Held that - Entire turnover cannot be brought to tax as such and there can be reasonable profit estimation on the above amount. Generally income is estimated at 12.5% in the case of big contracts and since assessee has already offered @ 10% profit on the accounted turnover we are of the opinion that income can be determined on the balance of the turnover at 12.5% of the turnover. AO is directed to do so. Accordingly assessee s ground are partly allowed. Assessee has claimed deduction of Rs. 1 Lakh under Chapter-VIA which was not allowed. Assessee is directed to furnish the necessary evidence to AO who should verify and allow the claim as per the provisions of law. This ground is considered allowed for statistical purposes. AO is directed accordingly.

Summary

Issues: Condonation of delay, Treatment of unexplained cash deposits as income, Disallowance of deduction claimed under Chapter-VIA

Condonation of delay:
The appeal was filed with a delay of 45 days, and the assessee submitted a petition for condonation supported by an affidavit. The delay was condoned by the tribunal as there was a sufficient cause for the delay, allowing the appeal to be heard on merits.

Treatment of unexplained cash deposits as income:
The assessee, an individual deriving income from contract works, had unexplained cash deposits in the bank. The Assessing Officer (AO) treated these deposits as unexplained cash deposits under section 68 of the Income Tax Act. The Commissioner of Income Tax (Appeals) partially confirmed the addition, considering only a portion of the deposits as explained turnover. The tribunal, after considering the nature of receipts related to contract works, held that the entire turnover cannot be taxed as income. Citing various case laws, the tribunal directed the AO to estimate income at 12.5% of the balance turnover, allowing the appeal partly.

Disallowance of deduction claimed under Chapter-VIA:
The assessee claimed a deduction of Rs. 1 Lakh under Chapter-VIA, which was disallowed as no evidence was provided. The tribunal directed the assessee to furnish necessary evidence to the AO for verification and allowed the claim as per the provisions of the law, considering this ground allowed for statistical purposes.

In conclusion, the tribunal partly allowed the appeal for statistical purposes, directing the AO to estimate income at 12.5% of the balance turnover and to verify and allow the deduction claimed under Chapter-VIA based on the provided evidence.