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I.T.O., Ward-53 (4) , Kolkata Versus Sri Badal Krishna Saha

2015 (11) TMI 1204 - ITAT KOLKATA

Estimation of rate of net profit from business - CIT(A)estimated @ 4% as against 8% adopted by AO after rejecting the books of accounts - Held that:- We find that the assessee had not disclosed one savings bank account with Allahabad Bank Gariahat Branch in his books and hence the Learned AO was justified in rejecting the books of accounts and determining the profits on an estimated basis u/s 145(3) of the Act. We find that the Learned CITA had considered the average net profits declared by the .....

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t profit @ 6% as business income - Held that:- CIT(A) found that the assessee was not able to prove the credits in the said bank account to the extent of ₹ 22,25,000/- and held that the same has to be construed as turnover of the assessee and net profit to be determined at the rate of 6% thereon as he found that profits from undisclosed business would normally be higher than the regular business profits as the assessee need not incur certain expenditure thereon. We also find that the findi .....

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ngs have not been refuted by the revenue . Moreover, we hold that since the security deposits were made in the earlier years, the same cannot be the subject matter of addition as undisclosed income u/s 69 of the Act in the assessment year under appeal. Hence we are not inclined to interfere with the findings of the Learned CITA in this regard. - Decided against revenue

Addition towards interest on fixed deposits - business income OR income from other sources - CIT(A) deleted the addi .....

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that the Learned CITA had only accepted to the contentions stated by the assessee during first appellate proceedings and proceeded to accept the claim of the assessee. No evidences were produced to support the contentions of the assessee in this regard either before the Learned CIT(A) or before us. In the absence of clear evidences to prove the business nexus of investing the fixed deposits, the resultant interest income had to be taxed only as income from other sources. - Decided in favour rev .....

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t, 1961 (hereinafter referred to as the Act ). 2. Shri.Pinaki Mukherjee, JCIT, the Learned DR argued on behalf of the revenue. Shri.K.M.Roy, FCA, the Learned AR argued on behalf of the assessee. 3. The first issue to be decided in this appeal is that whether the Learned CITA is justified in applying lower estimated rate of net profit from business @ 4% as against 8% adopted by the Learned AO after rejecting the books of accounts. 3.1. The brief facts of this issue is that the assessee is a civil .....

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ound that the assessee had maintained a savings bank account with Allahabad Bank, Gariahat Branch, Kolkata which was also not disclosed in the books of accounts maintained by the assessee and accordingly found it as a defect in the books of accounts and proceeded to reject the books of accounts and determine the profit on an estimated basis u/s 145(3) of the Act. The net profit was estimated at 8% of gross receipts by the Learned AO and determined at ₹ 21,42,165/- (8% of ₹ 2,67,77,05 .....

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ifying the rejection of books of accounts by the Learned AO and the estimation of profits @ 8% of gross receipts. In response to this, the Learned AR argued that the Learned CITA had brought down the estimation of net profits to 4% based on average profit ratio of the ,earlier years and accordingly prayed for non interference to the Learned CITA order in this regard. 3.3. We have heard the rival submissions and perused the materials available on record. We find that the assessee had not disclose .....

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y had determined the net profit at 4% of gross receipts which in our opinion is reasonable in the facts and circumstances of the case. Hence we are not inclined to interfere with the order of the Learned CITA in this regard. Accordingly, the ground no.1 raised by the revenue is dismissed. 4. The second issue to be decided in this appeal is as to whether the Learned CITA is justified in increasing the turnover by ₹ 22,25,000/- credited in the undisclosed bank account and directing the Learn .....

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ount and brought to tax a sum of ₹ 91,96,120/-. On first appeal, the Learned CIT(A) held that the onlu source of income for the assessee is his business of contractor / subcontractor. The Learned CITA also found that out of the total credits in the undisclosed bank account, a sum of ₹ 22,25,000/- was also found credited. This was initially informed by the assessee as unsecured loans. However, no details for the same were produced before the Learned AO. Later the Learned CITA treated .....

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rom the undisclosed bank account and agreed to the proposition of the assessee that the credits in the said bank account are only towards business receipts. Accordingly, the Learned CITA directed the Learned AO to delete the addition towards peak credit in the sum of ₹ 91,96,120/- and directed to add 6% of sum of ₹ 22,25,000/- as business profits of the assessee in addition to the regular business profits added as per ground no.1 hereinabove. Aggrieved, the revenue is in appeal befor .....

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the assessee. This fact is also stated by the Learned CITA in para 4.4 of his order. He argued that having said so, the Learned CITA erred in coming to a conclusion that the said credits for ₹ 22,25,000/- should only represent business receipts of the assessee and accordingly pleaded for restoration of the order of the Learned AO in this regard. In response to this, the Learned AR vehemently supported the order of the Learned CITA and also argued that in any case, the order of the Learned .....

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as business transactions of the assessee and that is the reason he himself had adopted peak credit theory and added the peak credit balance of ₹ 91,96,120/- in the assessment. We find that the Learned AO having rejected the books of accounts and proceeding to determine the net profit on an estimated basis u/s 145(3) of the Act could not make any separate addition towards peak credit balance which admittedly is also arising out of the business of the assessee. However the Learned CIT(A) fou .....

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me of the assessee is his income from contract / sub contract business has not been refuted by the revenue. Hence we are in agreement with the findings given by the Learned CITA in this regard. Accordingly, the ground no.2 raised by the revenue is dismissed. 5. The third issue to be decided in this appeal is as to whether the Learned CITA is justified in deleting the addition made in the sum of ₹ 9,01,870/- towards undisclosed sundry debtor. 5.1. The brief facts of this issue is that the a .....

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rlier years by the assessee and not during the assessment year under appeal. Moreover, he also found that the security deposit was created by deduction out of sale proceeds receivable from the said subcontractor and accordingly it is only non-maintenance of proper entries in the books of accounts which in any way has been rejected by the Learned AO and has been accepted by the assessee and the creation of security deposit is clearly explained by the assessee. The Learned CITA also found that as .....

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he undisclosed sundry debtor of ₹ 9,01,870/- into the turnover of the assessee without valid reason. 5.2. The Learned DR vehemently supported the order of the Learned AO. In response to this, the Learned AR argued that the addition has been made by the Learned AO only on the premise that the security deposit was not reflected in the books of accounts of the assessee. He further argued that no addition need to be made on this count when books itself have been rejected by the Learned AO. He .....

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of West Bengal, to whom the assessee was working as a sub-contractor, had not been reflected in the books of accounts of the assessee. We find that the Learned AO had already rejected the books of accounts of the assessee and had proceeded to determine the net profit from business on an estimated basis. Having done so, there is no need to get into the same books for making an independent addition towards security deposit. In any case, we find that the Learned CITA had given a categorical finding .....

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sed. 6. The last issue to be decided in this appeal is as to whether the Learned CIT(A) is justified in deleting the addition of ₹ 74,826/- towards interest on fixed deposits by reckoning the same as business income as against the claim of the Learned AO as income from other sources. 6.1. The brief facts of this issue is that the assessee had derived interest income on fixed deposits of ₹ 74,826/- and credited the same in his profit and loss account and claimed the same as business i .....

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cepted to the contentions of the assessee by treating the interest income on fixed deposits as business income and since business income is estimated by the Learned AO , no separate addition need to be made on any other count. Aggrieved, the revenue is in appeal before us on the following ground:- 4. That the Ld. CIT(A) has erred in treating interest income of ₹ 74,826/- as business income of the assessee relying on the treatment of this income in earlier years. 6.2. The Learned DR argued .....

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ess of the assessee and hence the interest income derived thereon has to be treated as business income only. He further argued that since the business income of the assessee has been determined by the Learned AO on an estimated basis, the Learned CITA had rightly deleted the addition of ₹ 74,826/- being interest income on fixed deposits, by stating that no separate addition need to be made on account of any other business income. 6.3. We have heard the rival submissions and perused the mat .....

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