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2021 (4) TMI 629 - AT - Income TaxUnexplained cash credits addition u/s.68 - unexplained commission u/s.69C - as per assessee when books of accounts were rejected u/s.145(3) of the Act and profit is estimated, then same books of accounts cannot be considered for invoking provisions of section 68 to make addition - assessee has also challenged addition on merits by filling necessary evidences including confirmation letters from the creditors and argued that the assessee had discharged his burden to prove the identity, genuineness of the transactions and credit worthiness of the parties - HELD THAT:- It is an admitted fact that the AO has rejected books of account u/s.145(3) of the Act and estimated profit from the business by adopting 12.5% net profit on gross receipts - once books of account are rejected u/s.145(3) of the Act, no further additions can be made by relying upon same books of account either in respect of cash credits u/s.68 of the Act or unexplained commission expenses u/s.69C of the Act, because in order to invoke provisions of section 68 of the Act, it is essential that credit should be from the books of account of the assessee maintained for that year. Once, the books of account maintained by the assessee is treated as no longer in existence by rejecting those books u/s.145(3) of the Act, then for all purposes including for the purpose of section 68 of the Act, said books of account ceased to exist and hence, those books cannot be relied upon to make addition towards unexplained credit u/s.68 of the Act - See G.K. CONTRACTOR [2009 (1) TMI 840 - RAJASTHAN HIGH COURT] where it was clearly held that “AO having estimated the profit by applying a higher net profit rate to total contract receipts after rejecting assessee’s books of account by invoking the provisions of section 14(3), no separate addition can be made on account of cash credit u/s.68, even though the assessee has failed to discharge its onus of proof in explaining the amount shown in the books of account". Thus to make additions u/s.68 or 69 essential condition is books of account should be maintained by the assessee for the relevant financial year. If books of account of the assessee are rejected and income is estimated by applying certain profit rate, it would take care of all expenses necessarily to be incurred for earning profit and hence, when profit is estimated no separate addition can be made towards unexplained commission u/s.69 - CIT(A) after considering relevant facts has rightly held that the AO is erred in making addition towards cash credit u/s.68 of the Act and unexplained commission u/s.69C of the Act, when the books of account were rejected u/s.145(3) of the Act. Once loans taken by the assessee are genuine which are supported by necessary evidences and further said loans were repaid in subsequent financial year by cheques then said loans cannot be considered as unexplained cash credit u/s.68 of the Act. Therefore, we are of the considered view that the AO was erred in making additions towards cash credit u/s.68 of the Act and unexplained commission u/s.69C - Decided against revenue.
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