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2015 (10) TMI 1492 - ITAT LUCKNOW

2015 (10) TMI 1492 - ITAT LUCKNOW - [2015] 40 ITR (Trib) 337 (ITAT [Luck]) - Addition on deposits in savings bank account of the assessee - Held that:- This deposit includes an amount of ₹ 2 lakhs transferred from M/s. Star Tex through cheque No. 800244 and also noted that Star Tex is a concern from which the assessee is regularly purchasing cloth as raw material to be consumed in his proprietorship concern M/s Hoor Creators, which is engaged in manufacturing of garments. In the light of t .....

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er accordingly.

Addition on account of initial capital for doing this business outside the books - Held that:- Assessee was having opening balance of ₹ 3,18,872 in this bank account and in our considered opinion, for doing an annual turnover of ₹ 16.90 lakhs for which the addition has been made by the Assessing Officer, this much fund is sufficient as initial capital. Hence, in our considered opinion, in the facts of the present case, no addition is called for on account o .....

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urchase during the present year. Regarding the addition to be made under section41(1), it is essential that the liability should cease to exist as per the judgment of the hon'ble apex court rendered in the case of Chief CIT v. Kesaria Tea Co. Ltd.

In the present case, it is seen that the assessee is still showing these creditors as liability. Assessee has not written back the liability in his accounts. In the light of these provisions of section 41(1) and the judgment of the hon'ble .....

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.K. GARODIA, JJ. For the Appellant : Shri Swaran Singh, FCA, Shri S. K. Jain, FCA For the Respondent : Shri Puneet Kumar, D. R. ORDER A. K. Garodia (Accountant Member).- These are the cross-appeals filed by the assessee and the Revenue, which are directed against the order of the Commissioner of Income-tax (Appeals)-II, Kanpur dated March 11, 2013 for the assessment year 2009-10. 2. Since the grounds involved in these appeals are inter-connected, we decide the issues raised by both sides simulta .....

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sioner of Income-tax (Appeals), he deleted an addition of ₹ 7,52,415 pertaining to M/s. Raj Kumar and Co. but confirmed two additions of ₹ 8,22,415 and ₹ 5,85,571 pertaining to M/s. Fashion Traders and M/s. Thakurji Textiles respectively. Now the assessee is in further appeal before us for two additions upheld by the Commissioner of Income-tax (Appeals) whereas the Revenue is in appeal for the part additions deleted by the CIT (Appeals). 3. It was submitted by the learned autho .....

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ness. He submitted that it has to be accepted that the addition sustained by the Commissioner of Income-tax (Appeals) is on account of gross profit of the turnover in the bank account and for capital employed for doing this business outside books. He submitted that the gross profit in the regular business of the assessee is 5.5 per cent., as has been noted by the Assessing Officer in para 3 of the assessment order. Regarding the capital employed in this business, he submitted that the summary of .....

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and there is no purchase during the present year. He submitted that under these facts, no addition can be made in the present year. 4. As against this, the learned Departmental representative for the Revenue supported the orders of the Assessing Officer. 5. We have considered the rival submissions. Regarding the first addition made by the Assessing Officer of ₹ 16,90,811 against which addition was upheld to the extent of ₹ 10 lakhs, we find that the Assessing Officer made the additi .....

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has to be accepted that the deposit in this bank account is business transaction and business receipts and therefore, in respect of such deposit in bank account, the addition should be made to the extent of gross profit on such undisclosed business turnover and not the entire deposit in bank account. 5.1. Regarding the gross profit rate, we find that it was the claim of the assessee before the Assessing Officer that 5.5 per cent. gross profit addition should be made in respect of this deposit i .....

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irmed. We order accordingly. 5.2. Regarding the addition on account of initial capital for doing this business outside the books, we find force in the submissions of the learned authorised representative for the assessee that the assessee was having opening balance of ₹ 3,18,872 in this bank account and in our considered opinion, for doing an annual turnover of ₹ 16.90 lakhs for which the addition has been made by the Assessing Officer, this much fund is sufficient as initial capital .....

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with regard to credit balance of three creditors, M/s. Fashion Traders ₹ 8,22,415, M/s. Raj Kumar and Co. ₹ 7,52,435 and M/s. Thakurji Textiles ₹ 5,85,571, total ₹ 21,60,421, it is noted by the Assessing Officer in para 7 of the assessment order that these creditors were having opening balances and there is no purchase during the present year. The addition appears to have been made by the Assessing Officer under section 41(1) although the Assessing Officer has not mentio .....

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