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2015 (12) TMI 1374 - ITAT AHMEDABAD

2015 (12) TMI 1374 - ITAT AHMEDABAD - TMI - Addition u/s 69 for unexplained investment - Held that:- In the case under appeal also there has been no finding by the Assessing Officer about the defects of books of accounts as well as detection of undisclosed investment which may have been made by the assessee from the undisclosed sales. In these circumstances it will not be justifiable to impose GP @ 16.78% on the undisclosed turnover when separate additions has already been made for peak credit, .....

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.1 will be reduced to ₹ 5,33,659/-.

Addition on account of unexplained investment in FDI - Held that:- Assessee has accepted that the credits in the disclosed bank account were not shown in the books of account and did not put forth any proper explanation for these cash deposits in its account and further most of the withdrawals from this bank account have been made for payment to Kotak Securities Ltd. for share trading business. This means that flow of funds in this account was .....

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sment proceedings Assessing Officer found that assessee had made investments in cash certificates in various banks in the form of Fixed Deports and these Fixed Deposits were jointly held by the assessee with either his father or mother or his wife and the photo of the assessee was appearing on these Fixed Deposits and these Fixed deposits were not reflected in the balance sheet of any of the other joint holders and therefore, this amount was added as unexplained investments. Even before ld. CIT( .....

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ground and in these circumstances, we dismiss this ground of assessee. - ITA No. 201/Ahd/2012 - Dated:- 18-12-2015 - Shri S. S. Godara, JM And Manish Borad, AM For the Appellant : Ms Urvashi Shodhar, AR For the Respondent : Shri Rajdeep Singh, Sr. DR ORDER Per Manish Borad, Accountant Member This is an appeal filed by the assessee against the order of CIT(A)-IV, Surat dated 21.10.2011 in appeal No.CAS-IV/272/10-11. Assessment was framed u/s 143(3) of the Income-tax Act, 1961 (in short the Act) b .....

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following additions:- (i) Addition u/s 69 for unexplained investment - ₹ 27,90,310/- (ii) Addition on account of unexplained investment in FDI at - ₹ 2,15,531/- Aggrieved, assessee went in appeal before CIT(A) wherein assessee s appeal was partly allowed and being further aggrieved, assessee is now in appeal before the Tribunal. 3. Ground nos. 1 & 2 being inter related have been taken together and they read as under :- 1. The ld. CIT(A) erred in law and on facts in sustaining ad .....

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s account ignoring the fact that once addition of peak balance is made there is no justification of any separate additions. Ld. CIT(A) ought to have deleted such amount comprising in additions made by AO u/s 69 of the Act. 4. With the assistance of ld. AR and ld. DR and perusing the record available on record, we are able to gather that during the course of assessment proceedings on the basis of some information, Assessing Officer detected one a/c held by assessee with ICICI bank which was not s .....

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atisfied with the reply of assessee for adopting peak balance of this account and finally resorted to make addition of ₹ 25,64,333/-. 5. However, ld. CIT(A) gave part relief to the assessee by observing as under :- In regard to credits in undisclosed bank a/c. was ICICI Bank. 3.4.1. I have gone through the facts of the case. There is no dispute regarding the bank account with ICICI bank being undisclosed. It has been accepted by the appellant that the account remained to be considered. Fro .....

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sales deposits. As the deposits are trading receipts, it is the profit which has to be considered as income. However, since the accounts itself is an admittedly undisclosed account, the income accruing to the appellant from the transactions in the account will be the aggregate of - 1. Peak of credit in the account less opening credit balance. The peak is found to be ₹ 1,31,320/- appearing on 4.4.2007 and opening balance is ₹ 4,570/-. The addition on account of peak of credit would be .....

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n of the AO that profit from undisclosed transactions would be higher than disclosed transactions nor the argument of the assessee that it should be assessed at net profit rates is acceptable. Net profit rates cannot be applied as the appellant has not given any evidence regarding expenses through the account and a presumption can be raised that expenses only in the nature of direct expenses have been incurred. The disclosed gross profit rate of the appellant is 16.78%. Therefore, the profits fr .....

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pellant that he has made payments aggregating to ₹ 1,79,481/- to GE countrywide CFS Ltd. and to City Financial Consumer Finance from this account which would be capital in nature and not available for rotation. 5. Interest earned from the account ₹ 69/- Therefore, income of the appellant from the undisclosed ICICI bank account ₹ 8,39,832/-. 6. Ld. AR submitted that the undisclosed sales as observed by Assessing Officer at ₹ 25,64,333/-. The undisclosed sales are only to t .....

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25,64,264/- including interest credits of ₹ 69/-. Further submissions made by ld. AR of applying net profit rate on undisclosed sales of ₹ 7,88,125/- seems to be far from truth and baseless as this bank account was not appearing in the books of assessee and as such we will proceed to decide the fate of total credits of ₹ 25,64,264/- with ICICI Bank. Ld. CIT(A) has sustained addition at ₹ 8,39,832/- from undisclosed bank account with ICICI Bank as follows :- i) Peak of cr .....

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scaling down single addition of ₹ 25,64,264/- made by Assessing Officer into five categories as mentioned above. Assessee has raised two grounds against above categorization of addition sustained by ld. CIT(A) by way of challenging the total sustained addition of ₹ 8,39,832/- in ground no.1 and again challenged sustained addition of cash shortage of ₹ 1,03,249/- and payment of ₹ 1,79,481/- made to G.E. countrywide being capital in nature. Even when the amount of ₹ .....

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t and withdrawal as the source of cash deficit was not ascertainable from the cash flow statement. 10. As regards sustained addition of ₹ 4,30,283/- calculated by ld. CIT(A) @ 16.78% of trading transactions, we find that during the course of assessment proceedings apart from the treatment of undisclosed credits in the undisclosed bank account of ₹ 25,64,264/- Assessing Officer has not raised any objection in the books of account maintained by the assessee and has also not invoked the .....

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f sales by itself cannot represent the income of the assessee who has not disclosed the sales. The sales only represent the price received by the seller of the goods for the acquisition of which it has already incurred the cost. It is the realization of excess over the cost incurred that only forms part of the profit included in the consideration of sales. Therefore, unless there is a finding to the effect that investment by way of incurring cost is acquiring goods which have been sold has been .....

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we find that in the case under appeal also there has been no finding by the Assessing Officer about the defects of books of accounts as well as detection of undisclosed investment which may have been made by the assessee from the undisclosed sales. In these circumstances it will not be justifiable to impose GP @ 16.78% on the undisclosed turnover when separate additions has already been made for peak credit, cash deficit and payments towards capital nature of expenditure and as such Net Profit .....

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and ground no.2 is dismissed. 12. Ground no.3 of the appeal reads as under:- 3. The ld. CIT(A) erred in law and on facts in confirming action of AO in respect of addition made of ₹ 2,25,977/- in respect of account with Surat Peoples Co operative Bank Ltd. Both the lower authorities failed to appreciate that the impugned account was disclosed in the books of the appellant and the closing balance was incorporated in the balance sheet. Ld. CIT(A) ought to have deleted addition made of disclos .....

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this account have been used for issuing cheques to Kotak Securities Ltd. for the purpose of share trading. 14. Appeal before CIT(A) could not bring any relief to the assessee. Assessee is now in appeal before the Tribunal. 15. The ld. AR tried to impress upon that this account should not be treated as undisclosed as the closing balance of this account were forming part of the bank balance shown in the balance sheet and the credits in this account are also part of the undisclosed turnover. There .....

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thdrawals from this bank account have been made for payment to Kotak Securities Ltd. for share trading business. This means that flow of funds in this account was not at all related to the business of job of jari kasab done by the assessee and, therefore, the contention of the ld. AR for applying net profit rate on this amount of ₹ 2,25,977/- cannot be accepted and accordingly we are of the view that ld. CIT(A) has rightly confirmed this addition of unexplained investment in the hands of t .....

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deleted addition made by AO. 19. The ld. AR submitted that this amount of FDR belonged to third parties and are not pertaining to the year under appeal. 20. The ld. DR relied on the orders of lower authorities. 21. We have heard the rival contentions and perused the material on record. We find that during assessment proceedings Assessing Officer found that assessee had made investments in cash certificates in various banks in the form of Fixed Deports and these Fixed Deposits were jointly held .....

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