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2016 (2) TMI 1274 - AT - Income TaxAddition u/s 68 - unexplained Cash deposits found in the bank account of the assessee - Estimation of profit from spare parts business - As per CIT-A Deposits made by the assessee in the bank account represents business transactions pertaining to spare parts business and accordingly estimated profit there from at the rate of 12%, since the assessee had admitted in the statement that he has been making profit at 10 to 12% from trading in spare part - HELD THAT:- Since the assessee is carrying on business in the mixer grinders and spare parts and since there has been successive deposits and withdrawals, we are of the view that the ld. CIT(A) was justified in considering the bank deposits as relating to business transactions. However, we are unable to understand as to why he considered them as relating to spare parts business and not related to mixer grinder business. Be that as it may, we notice that the Ld CIT(A) has estimated the rate of profit on the basis of statement given by the assessee and hence we do not find any reason to interfere with his order on this issue. Estimation of profit from sale of mixer-grinders - This addition has also been made on the basis of statement given by the assessee, wherein he had stated that he is selling approximately 1500 pieces of mixer-grinders in a year - AO has placed full reliance on the statement given by the assessee, which he has given on approximate basis - AO has not allowed any deduction towards expenses - assessee has also stated that his income from spare parts business ranges from ₹ 5000 to 6000/- per month approximately, meaning thereby he is earning a sum of ₹ 60,000/- to 72,000/- per year from the business of spare parts. CIT(A) has, however, estimated the income from spare parts at ₹ 1,27,560/-, which is contrary to the statement given by the assessee. CIT(A) has not explained as to why he has considered the bank deposits as representing the transactions relating to spare parts business alone - possibility of depositing the sale proceeds relating to mixer grinders cannot be ruled out. We are of the view the income of the assessee has to be estimated by considering all the facts in a holistic manner. Accordingly, we proceed to estimate the profit of assessee as under: (a) We adopt the net profit on sale of one piece of mixer-grinder at ₹ 225/- after allowing administrative expenses @ 30%, i.e., ₹ 75/- per mixer-grinder. Accordingly, the profit earned from sale of mixer– grinder shall be (1500 x ₹ 225/-=3,37,500). (b) The income from sale of spare parts business is estimated at ₹ 65,000/- based on the statement given by the assessee. (c) Aggregate of both the income shall work out to ₹ 4,02,500/-. (d) Since we have estimated the income from the business activities, we are of the view that the income of ₹ 1,27,560/- estimated by the ld. CIT(A) out of bank deposits is required to be telescoped against the above said income estimated by us. We modify the order of Ld CIT(A) and direct the AO to restrict the addition relating to bank deposits and sale of mixer grinders to ₹ 4,02,500/-.
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