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2018 (3) TMI 75 - AT - Income TaxReopening of assessment - validity of reasons to believe - suppression of receipts - unexplained cash deposits - Held that:- On perusal of the reasons demonstrate that the assessing officer did form a reasonable belief that income of the assessee which is subject to tax of the assessee, has escaped assessment, as the entire receipts from Godfrey Philips (I) Ltd., may have been suppressed. Though the wording “escaped assessment” has not been used, the sum and substance of the reasons demonstrate that the assessing officer had reason to believe based on the tangible material that income chargeable to tax has escaped assessment. Thus, this argument of the ld. counsel for the assessee is dismissed as devoid of merit and the re-opening of assessment is upheld. The second argument that, no addition has been made on the issue on which the assessment was reopened and hence the other addition which have no relation or nexus with the reasons recorded are bad in law, the assessment was reopened on the ground that there was cash deposits of ₹ 89,10,640/-, in one savings bank account maintained in Canara bank, Siliguri Branch and that no evidence was produced by the assessee in support of the contentions that these deposits were out of sale proceeds of cigarettes. AO has come to a conclusion that the undisclosed cash receipts was ₹ 48,82,702/-, which he treated as income at Para 6(i) of his order. Thus, irrespective of the fact, whether this addition is ultimately made in the same manner or not, the fact remains that an addition was made on the issue on which the re-opening has been done. Thus, this argument of the assessee fails. On merits we find when the deposits in a Savings Bank Account, are the subject matter of enquiry, we do not understand how there can be a presumption of withdrawal of a huge amount of ₹ 48,82,702/-, in cash from business. M/s. Godfrey Philips India Ltd., issued to the assessee, credit notes, totalling to ₹ 73.56.250/-. Out of this, display and scheme receipts, was a figure of ₹ 55,57,483/-. The surplus from the same was ₹ 22,39,198/-, after meeting the expenses. This was credited to the Profit & Loss Account of the assessee under the head “Display & Scheme” receipts. Under the head “Distribution of Subsidy”, the assessee received credit notes of ₹ 17,83,767/-. The surplus from this account was ₹ 2,34,350/-, after expenses. This was credited to the profit and loss account under the head “Miscellaneous Income”. These facts and figures have not been controverted by the ld. D/R. Whether the Assessing Officer can made separate additions of items of expenditure reflected in the P & L A/c, when he rejects the books of accounts and estimate the profit as a percentage of turnover - Held that:- Applying the propositions of law laid down in the case of Income-Tax Officer vs Kenaram Saha And Subhash Saha (2008 (3) TMI 350 - ITAT CALCUTA) we uphold the contention of the assessee that, once the books of account have been rejected and the net profit has been estimated as a percentage of turnover by AO, no further additions on account of unverifiable expenditure and of items claimed in the profit and loss account etc., can be made. Gross receipts from M/s. Godfrey Philips (I) Ltd., cannot be treated as income of the assessee. Such action is against the facts of the case. Hence, this argument of the assessee is upheld and the addition estimated at 2 per cent of the turnover as determined by the Assessing Officer, is sustained. The balance of the additions are hereby deleted. - Decided partly in favour of assessee.
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