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2023 (3) TMI 430 - AT - Income TaxEstimation of income - Rejection of books of accounts - Determination of income - difference in turnover as per Form 26AS and turnover reported in books of accounts - CIT(A) directed the AO to estimate 5% profit on total receipts as per Form 26AS - CIT(A) further directed the AO to determine the income of the assessee on the basis of 5% net profit estimated on total turnover and difference between income offered in the return of income and 5% estimated profit as per directions, should be treated as quantum addition which is liable to be sustained - HELD THAT:- CIT(A) while adopting 5% net profit has analyzed previous financial results of the assessee right from AYs 2008-09 to 2013-14 and observed that the average net profit declared by the assessee for all those years works out to 3.25%. If you consider average net profit declared by the assessee for earlier assessment years with income determined by the AO by adding difference in turnover as per Form 26AS, the net profit percentage determined by the AO for the impugned assessment year is exorbitant, which gives distorted figures. Therefore, she has made a fair estimation of 5% net profit by taking into account net profit estimated by the AO for earlier assessment years and also the directions of the JCIT’s order u/s.144A of the Act, for the AY 2016-17. The method followed by the Ld.CIT(A) to determine income of the assessee is appears to be reasonable and thus, we are of the considered view that there is no reason to interfere with findings given by the Ld.CIT(A) to estimate 5% net profit on grossreceipts as per Form 26AS. Thus, we are inclined to uphold the findings of the Ld.CIT(A) and dismiss the appeal filed by the Revenue for the AY 2015- 16. Estimation of profit on cash deposits found in the bank account of the assessee - AO was of the opinion that the assessee could not explain source for cash deposits and thus, treated cash deposits as unexplained income of the assessee - HELD THAT:- AO has made addition towards difference in gross turnover as no business income of the assessee. Ideally, when the AO has treated gross-receipts as per Form 26AS as business turnover of the assessee, then addition made towards differential turnover as business income of the assessee, will take care of cash deposits found in the bank account of the assessee. If you telescopic, addition made towards business income to cash deposits, in our considered view, further addition towards cash deposits u/s.69A of the Act, appears to be double addition on very same income. CIT(A) has taken a reasonable view taking into account overall facts and circumstances of the case and has estimated net profit of 5% which is further strengthened by the fact that in earlier assessment years, the AO himself has estimated 5% net profit on total turnover on the basis of directions of the JCIT’s order passed u/s.144A of the Act for the AY 2016-17. Therefore, we are of the considered view that there is no error in the reasons given by the Ld.CIT(A) to estimate net profit at 5% on total turnover, including cash deposits found in the bank account of the assessee and thus, we reject the ground taken by the Revenue.
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