No separate addition can be made when net profit is estimated by rejecting book results

Brief of the case:

In the case of Brahamanand Agarwal, Thekhedar Vs. DCIT Jaipur Bench of ITAT have held that when net profit is estimated by AO by rejecting the book result U/s 145(3) of the Act, no separate addition can be made on account of cash creditor. ITAT relied upon the decision of Rajasthan High Court in the case of CIT Vs. G.K. Contractor 19 DTR 305 (Raj) wherein the Hon’ble Jurisdictional High Court held that when net profit is estimated by the Assessing Officer by rejecting the book result U/s 145(3) of the Act, no separate addition can be made on account of cash creditor.

Facts of the case:

• Assessee is a civil contractor and having work for government department like PHED and Marketing Board and has declared a net profit rate of 5.66% on the gross receipt of Rs. 1,65,29,950 totaling to Rs. 9,35,595/-.
• During the assessment proceedings assessee was asked to file books of account regarding claim of net profit ratio.
• The assessee was requested to produce the books of account and details of site wise, stock register, vouchers for labour charges and diesel and fuel vouchers for verification.
• Assessee failed to produce complete books, and filed partly on various occasions, and filed affidavit that he had dispute with his accountant.
• AO made assessment in absence of complete books of account, non-cooperation of the assessee in producing the bills/vouchers and he decided the case.
• AO applied 12.5% N.P. on total receipt of Rs. 1,65,29,950/-, which was worked out at Rs.20,66,244/-.
• During the year consideration AO found that assessee’s account in PNB was partly credited of amount Rs. 34, 64,896/- through cash deposit and partly from clearings.
• AO found difficulty in verification of said credits as assessee had not produced complete books of account, purchase and sales and other expenses vouchers for verification.
• AO observed that the amount received through clearings in this bank account were from out of contract receipt but cash deposited in the bank account is undisclosed income of the assessee.
• AO enquired from the bank about these deposits made but the bank had also not supplied the details of these deposits.
• AO finally concluded that these undisclosed cash deposits is also from the contract business, therefore, he applied 12% N.P. rate on Rs. 32,64,896/- and made addition of Rs. 4,08,112/- in the income of the assessee.
• AO further observed that on verification of bank account, the assessee has deposited cash on different dates to the tune of Rs. 7,98,000/-, which includes DD cancellation of Rs. 90,000/-.
• The assessee has not explained source of these cash deposits, therefore, AO made addition of Rs. 7,98,000/- in the total income of the assessee.
  

Contention of the assessee: