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2016 (6) TMI 494 - ITAT HYDERABAD

2016 (6) TMI 494 - ITAT HYDERABAD - TMI - Addition on difference in cash and bank balances as per statement of accounts prepared on estimate and ad hoc basis - Held that:- financial statement cannot be relied upon to assess the actual transaction of the assessee. In our view, the AO has to assess the actual income of the assessee. No doubt, the turnover of the assessee is less than the turnover prescribed for tax audit u/s 44AB. Assessee had opportunity to opt for assessment u/s 44AD. However, a .....

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ating the income. At any rate, in the instant case, Assessing Officer having not specified any section/provision, the addition made by the Assessing Officer in our considered opinion is not sustainable.

If a separate addition has to be made, the onus is upon the Assessing Officer to bring on record some evidences to justify that the assessee had actually earned undisclosed income over and above what was estimated from the business of sale of scrap and also to bring that there were ad .....

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e fact that the Assessing Officer himself estimated arbitrary profit rate of 20.22%, but, also having regard to the past record of the assessee where the assessee has declared the profit range between 15 to 18%, which was accepted by the Assessing Officer. Thus Assessing Officer is not made out a case for making a separate addition - Decided in favour of assessee - ITA No. 88/Hyd/2016 - Dated:- 27-4-2016 - SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER For The Asse .....

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Act, 1961 (in short Act ) on 28/12/2011. AO determined the taxable income at ₹ 9,37,170 after making following additions: a) Made addition for non-submitting evidence to claim deduction u/s 80C ₹ 85,504/-. b) The assessee operated bank account and AO found that assessee received deposits to the extent of ₹ 15,80,207/-. AO treated the same as business turnover and adopted 20.22% as net profit from the business, added ₹ 3,19,517/- as income. c) The balance sheet submitted .....

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s. 4. Aggrieved with the above order, assessee is in appeal before us by raising the following substantive grounds of appeal: The order of the CIT (A) in so far as sustaining the addition of ₹ 3,59,843/- being alleged difference in cash and bank balances as per statement of accounts prepared on estimate and ad hoc basis vide corrigendum to the appellate order Dt. 27/11/2015 is erroneous in law, contrary to facts and against the principles of equity and natural justice. 02. Ld. CIT(A) erred .....

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without maintaining proper books of accounts and disclosing turnover ₹ 13,55,510/- and profit offered ₹ 2,51,024/- by claiming certain expenditure @ instead of 20.22%) as stated by AD is far excess than the rate of percentage in section 44AD @ 8%) which is applicable where no books of accounts are maintained and therefore, sustaining the addition is totally unjustified, unwarranted both in law and facts. 5. Ld. AR submitted that even before the CIT (A), the assessee categorically st .....

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and also the very addition is only the mistake committed in preparing the statements by not taking correct bank balance ₹ 4,34,636/- which clearly shows that the accounting statements prepared are not reliable and not based on actuals. 5.2 He, therefore, submitted that making an addition of ₹ 3,59,843/- being the difference in cash and bank balances as per bank statements and statements of accounts is totally unjustified and unwarranted both in law and facts. In other words, the tota .....

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ve considered the submissions of both the parties and materials on record. Ld. AR submitted that assessee had not maintained the books of account and submitted that financial statement which was prepared based on adhoc information. This financial statement cannot be relied upon to assess the actual transaction of the assessee. In our view, the AO has to assess the actual income of the assessee. No doubt, the turnover of the assessee is less than the turnover prescribed for tax audit u/s 44AB. As .....

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ce between cash and bank balance to make a separate addition. Once the books results are rejected and turnover is estimated based on the bank statement, it is intriguing as to how the Assessing Officer sought to take into consideration the so called mismatch between the balance sheet prepared by the assessee and the bank balance shown therein. At any rate, a separate addition of ₹ 3,59,843/- was sought to be made without specifying as to under which section such disallowance/addition can b .....

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ccount as the basis for presuming it as turnover and adopting profit rate of 20.22%, which is also no basis since assessee had all along been declaring gross profit margin of 15 to 18% for the past several years, which has also been accepted by the Assessing Officer not only in earlier AYs but also in this year in so far as the balance turnover which was offered by the assessee. 8.1 The provisions of section 68 & 69, 69A, 69B and 69C merely refers to initial onus being cast upon the assessee .....

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age of profit, it implies that the books of account were rejected and income is estimated. It also implies that the Assessing Officer is of the opinion that the assessee had earned a specified income from the business of sale of scrap. In such an event, Assessing Officer may not be justified in blowing hot and cold and making a specified addition again based on the balance sheet prepared by the assessee, which was not accepted in totality by the Assessing Officer while estimating the income. At .....

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