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2017 (5) TMI 1205 - ITAT CHENNAIUnexplained cash deposits - Peak credit addition - Held that:- The assessee states of earning commission, while at the same time claims to be having trade debtors qua the transport business. The word ‘commission’ as used here is a misnomer, and signifies the difference between the rate/s at which the goods carriages are taken on hire and on which they are contracted out. That would imply that the assessee, at any given point of time, has outstanding dues of the transport business, i.e., against the transport work undertaken, and which he states as received, in part explanation of the cash deposits in his bank account. The amount realized would, presumably, also go to pay the trade creditors of the said business. This follows an acceptance of the assessee being in the transport business, which is established. Both the capital investment and the interest thereon, i.e., the total receipt, would stand to be brought to tax. This of-course is subject to applying a turnover ratio, which any business would entail. The Revenue has, in rejecting the plea, acted mechanically, without applying it’s mind with reference to the obtaining facts and the merits of the assessee’s statement. In fact, considering the turnover (total receipt) to be a part of the transport business instead (conduct of which is proven), would imply a lower profit rate and, besides, a lower amount being added on account of capital investment in-as-much as the said business would entail a higher capital turnover ratio, besides trade credits. There could be a scenario of the adjusted peak credit being below ₹ 8.50 lacs. This would not by itself warrant a reduction in the amount of addition on account of the capital employed in the two businesses. This is as, apart from the bank balance, which the peak credit in a bank account signifies, the assessee has admittedly other working capital assets in the form of trade debtors, and which have not been taken into account. This is as the investment in the trade has been estimated on the basis of a working capital (i.e. cash to cash) cycle, and which includes toward trade debts/credits as well. The assessee’s argument with reference to peak credit in the account thus stands also addressed. The addition for ₹ 23.21 lacs is thus restricted to ₹ 8.50 lacs, or such other sum as may be computed on the basis of the assessee’s bank accounts, as explained hereinbefore. Qua profit, only the TDS amount (Rs. 7,438/-) would stand to be further added. The assessee gets part relief. Needless to add, the assessee shall be allowed credit in respect of TDS on the IOC receipt. Assessee’s argument with reference to s. 44-AD is not maintainable as the assessee is admittedly engaged in the transport business, excluded as an eligible business u/s. 44-AD.
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