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TMI Blog2013 (8) TMI 756X X X X Extracts X X X X X X X X Extracts X X X X ..... account of low net profit when the addition was made without rejecting the books and finding any specific defect." 2. At the outset, the learned AR objected to the estimation of income by the Assessing Officer by rejecting the books of account. He submitted that the assessment year under consideration is the first year of business of the assessee as such the assessee incurred huge advertisement expenditure of Rs. 26,73,357/-. Being so, the rate of net profit declared by the assessee is very low i.e. 0.1%. The learned AR pointed out that if the said development expenditure is added back to the income of the assessee, the net profit comes to more than trade average, therefore, the books account could not have been rejected by the Assessing Officer. He contended that the rate of net profit worked out by the Assessing Officer at 5% is very high and, therefore, reasonable estimation has to be made. 3. Regarding addition of Rs. 41,46,233/- u/s 40(i)(ia) on account of non-deduction of tax at source, the learned AR submitted that provisions of section u/s 192C is not applicable as this is the first year of business of the assessee. 4. Regarding addition towards unexplained cash credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account it is incumbent upon the assessee to explain the nature and source of credit, creditworthiness of the party and genuineness of the transaction. The fact that the entries are shown in the books of account of the assessee whose income had already been computed on the basis of the estimate but not on the return filed by the assessee, that does not prevent the ITO from treating, but entitles him to treat, the unexplained cash credit as income from undisclosed sources which falls under the head of income "income from other sources". Unless the assessee, by independent and satisfactory evidence, establishes that those amounts relate or referable to the undisclosed income from known or disclosed sources viz., the business, whose income had already been estimated. In the present case, the assessee did not able to establish the cash credits mentioned above as genuine credits. The assessee's stand from the beginning and also before us is that the cash credits are genuine. The assessee never took specific stand that these unexplained cash credits are referable to the income from disclosed sources viz., business, whose income has been estimated by the Revenue authorities. In order to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness must be referable to the income of the business which had been computed on the basis of an estimate without accepting the return filed by the assessee, which amounts to double taxation of the same income, the Court ruled thus: "The question would seem to suggest that because the income from a disclosed source has been computed on the basis of an estimate and not on the basis of the return filed in respect of it, an income represented by a credit entry in the books of account of that source cannot be held to be income from another and undisclosed source. We do not see why it cannot be so held ..... if the income is treated as one from an undisclosed source which the question postulates, it is not treated as income of the disclosed source which had previously been assessed to tax and, therefore, there is in such a case no double taxation. It is not a case where the income sought to be taxed was held to be undisclosed income of a disclosed source, the income of which source had previously been taxed on the basis of an estimate ..... the question whether income represented by an entry in the books of a business is income of that business or of another business would have to be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar facts and circumstances. In Karnal Motors vs. CIT (2003) 180 CTR (Raj) 166 it was held that additions under s. 68 could not be telescoped with the trading addition where the assessee had not admitted that unexplained cash credits came out of black money earned in the current year or in an earlier year. In our opinion, a separate addition under s. 68 towards unexplained credit is sustainable in spite of addition made to the declared trading results is a question of fact which is to be decided based on circumstances in each case. 16. The benefit of telescoping was also considered by the Supreme Court in Anantharam Veerasingaiah & Co. vs. CIT (1980) 16 CTR (SC) 187 : (1980) 123 ITR 457 (SC) approving Lagadapati Sunna Ramaiah vs. CIT (1956) 30 ITR 593 (AP) observed that: "There can be no escape from the proposition that the secret profits or undisclosed income of an assessee earned in an earlier assessment year may constitute a fund, even though concealed, from which the assessee may draw subsequently for meeting expenditure or introducing amounts in his account books. But it is quite another thing to say that any part of that fund must necessarily be regarded as the source of une ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e factual but not argumentative. A view that the cash credits to the extent of the past intangible additions stand automatically explained would practically dispense with the necessity of the assessee giving any explanation of fact under section 68 where intangible additions were made in the earlier years and hence such a view is untenable. In the case of CIT vs. Manik Sons (1969) 74 ITR 1 (SC) it was held that only if the unexplained cash credit can reasonably be related to the amount covered by the intangible addition made in the past, or in the very year, necessary set off can be allowed. The principle that it is the assessee who should give a satisfactory explanation regarding cash credits is in no way rendered inapplicable merely because the assessee was found to have earned some undisclosed income in some earlier years for which additions had been made in the relevant assessments. If it is the assessee's case that the cash credits found in his books came out of the addition made to his income for an earlier year, it is undoubtedly open to him to put forward such a plea while furnishing explanation regarding such cash credits. While the fact of making of intangible additions i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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