9911796707
TMI Blog2010 (5) TMI 911X X X X Extracts X X X X X X X X Extracts X X X X ..... unexplained capital. 5. The learned Commissioner of Income Tax (Appeals) is not justified in sustaining the addition of ₹ 650,000/- made by the assessing officer towards unexplained unsecured loans. 6 Without prejudice to the above, the learned Commissioner of Income Tax (Appeals) ought to have granted benefit of telescoping. 7. Any other ground that may be urged at the time of appeal hearing." 3. Facts necessary for the purpose of disposal of the appeal are stated in brief. The assessee is engaged in the business of purchase and sale of Indian Made Foreign Liquor in the name and style of M/s.Naidu Wines. For the previous year relevant to the Assessment Year 2011-12, the assessee declared turnover of ₹ 1,79,47,800/- and admitted net profit of ₹ 3,38,936/-, being 1.89% of total sales. The Assessing Officer was of the view that profit declared by the assessee is too low and, therefore, assessee was called upon to furnish books of account and complete details of sales, along with relevant bills/vouchers, to support his stand that the profit declared by the assessee is reasonable. The assessee was also called upon to furnish the source of investment and to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the said payments, more particularly in the absence of books of account maintained by the assessee. Therefore, the source of investment was not proved / not substantiated with the evidence and accordingly an addition of ₹ 2,50,000/- was separately made. 7. Similarly, assessee claimed to have taken unsecured loans to the tune of ₹ 6,50,000/-. The assessee filed confirmation letters from 35 parties. Here also, the date on which the amounts were received was not mentioned in the confirmation letters. For the reasons given by the Assessing Officer with regard to the rejection of contention of the assessee, vis-a-vis source of introduction of capital, the Assessing Officer rejected the genuineness of unsecured loans /cash creditors and added the same under section 68 of the Act. Accordingly, assessment was completed on a total income of ₹ 34,75,758/-. 8. Aggrieved, assessee contended before the ld. CIT(A) that the Assessing Officer erred in taking into consideration the decision of the Hon'ble Andhra Pradesh High Court for estimating the net profit on the ground that the net profit would be more in IMFL trade, as against arrack business. It was further contende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) was of the opinion that the estimate of income of the assessee at 10% of purchase price would be reasonable in the circumstances of the case. He directed the Assessing Officer accordingly. 12. With regard to the addition of unexplained investment of ₹2,50,000/- and unsecured loans of ₹ 6,50,000/-, the case of the assessee was that the evidence in the form of confirmation letters filed before the Assessing Officer was sufficient to discharge the burden placed upon the assessee in proving the source and, at any rate, the benefit of telescoping ought to have been given since income was estimated in the earlier years and that additional income is deemed to be available for the purpose of making investment in this year. The ld.CIT(A) rejected both the contentions by observing as under:- "5.2 I have considered the submissions and the details filed. From the perusal of the confirmation letters and the affidavits it is noted that these parties have not mentioned as to the date on which the impugned amounts were given to the assessee. There was no evidence in support of their claim for income from agricultural activity. The land holding details were not furnished. Thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces, it is difficult to scientifically fix a particular rate of profit in this line of business. Therefore, I am left with no other alternative except to follow the Division Bench order of ITAT, Visakhapatnam in the case of Gudla Mothilal (supra) wherein net profit was estimated at 5%. It is not in dispute that the decision of the Tribunal placed before me is in respect of same district and for the same assessment year; therefore, it has to be assumed that the circumstances are identical in respect of both the traders in the absence of any contradictory material on this aspect. I, therefore, follow the decision of the ITAT (supra) and direct the Assessing Officer to estimate the net profit at 5% of total purchases, net of all expenditure. 17. Vide ground Nos. 4 & 5 the assessee contends that the addition of ₹ 2,50,000/- and ₹ 6,50,000/- referable to unexplained capital and unexplained loans was not based on proper evaluation of facts. Learned counsel for the assessee adverted my attention to the order of the Assessing Officer and relevant material placed in the paper book to submit that confirmation letters were obtained from the parties to prove that loans were provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t since 44 years, who had also given an identical amount which was stated to be repaid in the year 2012-13. It is intriguing as to how the person was working as agriculturist from the date he has taken birth. Such being the case, I am of the firm opinion that the addition made by the Assessing Officer was rightly confirmed by the ld. CIT(A) on this count. 21. However, the assessee raised an alternative contention, vide ground No.6, wherein it was submitted that in the immediately preceding years, the Assessing Officer made certain additions towards unexplained income and such income should be deemed to be available with the assessee and to that extent, the benefit of telescoping should be granted. It was contended that even in the immediate preceding year, the assessee declared lesser rate of profit whereas Tribunal ultimately confirmed the estimate at 5% of the sales. When an income is deemed to have been earned by the assessee, the benefit of availability of such income should also be given to the assessee and such amount should be deemed to have been available for making investments in the subsequent years. Having regard to circumstances, I set aside this issue to the file of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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