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3) Assessing Officer erred in law and facts in making addition of Rs. 2 lakh on account of presumed investment in stock / furniture / fixture / advance rent of shop was ever made by the appellant.

4) Assessing Officer erred in law and facts in making addition of Rs. 175000/- on account of estimating profit @ 5% u/s 44AF on presumed sales of Rs. 35 lakhs, particularly when no payment was ever made for liquor purchase by appellant & someone else purchased / sold liquor.

5. The Assessing Officer noted the assessee to have claimed deduction under Chapter VI-A at Rs. 28,000/- for which the necessary evidence was not filed and hence the same was disallowed. The assessee had failed to furnish the evidence of source of investment for purchase of car for Rs. 2,88,696/- and expenditure on insurance and registration of car. The Assessing Officer estimated the said expenditure at Rs. 15,000/- and an addition of Rs. 3,03,696/- was made as deemed income of the assessee. The assessee had not declared any income from wine business but as per the information received from Excise Department, the vend at Village Pai was allotted to the assessee during the financial year 2006-07. The assessee had deposited license fee of Rs. 10 lacs vide monthl y installments as detailed at part of pages 2 & 3 of the assessment order. The assessee in his verbal repl y dated 22.7.2009, had stated that the said vend was sold to some other persons who had run the said business and license fee was also deposited by the said persons. The contention of the assessee was rejected as he could not file any evidence of the sale of the vend. The Assessing Officer held that out of the first two installments of Rs. 3 lacs of license fee, Rs. 2 lacs was deposited out of undisclosed sources and as the assessee had run the business, the Assessing Officer held that the balance was funded out of the sale proceeds of wine. The Assessing Officer estimated the initial investment in the stock, furniture and fixture and advance rent for shop at Rs. 2 lacs which was also included as income of the assessee. Further, addition was made on account of income from wine business by estimating the sale for the financial year at Rs. 35 lacs and in the absence of the books of account being produced, provisions of section 44AF of the Act were applied for estimating the net profit @ 5%. The addition of Rs. 1,75,000/- was made on account of income from wine business.

11. We have heard the rival contentions and perused the records. The Assessing Officer while completing the assessment had made addition on account of two scores i.e. i) on account of investment for purchase of car and; ii) on account of investment and income from wine business. The Assessing Officer had received information from the C IB Wing on the above said accounts and despite several opportunities being afforded to the assessee, no information regarding the source of investment was furnished by the assessee before the Assessing Officer. The Assessing Officer accordingl y treated the investment in purchase of car at Rs. 2,88,696/- plus expenditure on insurance and registration of car estimated at Rs. 15,000/- as income of the assessee. Further, as per the information collected from the Excise Authorities, the assessee had paid license fee of Rs. 10 lacs in monthl y installments for the vend allotted during the financial year 2006-07. The assessee had paid Rs. 1 lac on 5.4.2006 and Rs. 2 lacs on 15.5.2006. The Assessing Officer estimated the source of investment i.e. payment of License Fee of Rs. 2 lacs out of undisclosed sources. Further addition was made on account of investment in stock, furniture, advance rent for shop etc at Rs. 2 lacs. The Assessing Officer also estimated the sales at 3 to 3.5% of the License fee paid. An estimation of sales at Rs. 35 lacs relatable to the financial year was made by the Assessing Officer on which appl yi ng a GP rate of 5%, income from business was worked out at Rs. 1,75,000/- under the provisions of section 44AF of the Act. Before the CIT(A), the assessee moved an applicable under Rule 46A for the admission of the additional evidence, which is copy of car loan of Rs. 2,30,000/- taken from the bank during the year. The C IT(A) considered such additional evidence and observed that assessee has failed to furnish any evidence with regard to the source of initial investment of Rs. 73,697/- i.e. excluding the car loan amount raised by the assessee. Further addition was made of installments paid during the year totaling Rs. 1,40,528/- as the assessee had failed to explain the sources of the same, an addition of Rs. 1,40,524/- was made on account of unexplained investment. Thus, addition of Rs. 2,40,220/- was confirmed by CIT(A). In respect of the estimation of source of investment and income from the wine business, the contention of the assessee was that he had sold the said vend to other person and the license fee was also deposited by that person. However, no details of the said person or any evidence of sale of vend was furnished before the Assessing Officer. In its written submissions before the CIT(A), the claim of the assessee was that where income is estimated u/s 44AD / AF of the Act, no addition is warranted on account of deposit of fee as income from undisclosed sources or investment in the stock, furniture etc. Reliance was placed on the ratio laid down by the Hon'ble Punjab & Haryana High Court in CIT Vs. Surinder Pal Anand in ITA No. 156 of 2010 and also CIT Vs. Aggarwal Engineering Company [206 CTR 648(P&H)]. The CIT(A) upheld the addition made by the Assessing Officer on account of initial payment of installment of vend allotted, initial investment in the infrastructure in purchase of furniture and also expenditure incurred in starting the business and thereafter estimating the business an income u/s 44AF of the Income Tax Act.

13. The ground Nos. 2, 3 & 4 raised by the assessee are against additions made on account of business started by the assessee. The onus was upon the assessee to establish that the investment / expenditure incurred in its name was out of proven sources of income / funds available. In the absence of the onus being discharged, we uphold the estimation of sales at Rs. 35 lacs and income of Rs. 1,75,000/-. Further, the said investment / expenditure is treated as deemed income of the assessee. We are in conformit y with the orders of the authorities below that the source of investment in making the initial investment in starting the wine business has not been proved by the assessee and addition on this account is warranted in the hands of the assessee. The first addition is on account of license fee paid to the Excise Authroties against the allotment of vend. The assessee has paid a sum of Rs. 3 lacs in the months of April and May, 2006 out of which credit for Rs. 1 lac was allowed by the authorities below out of the sale proceeds generated form the business and in the absence of any source for the initial investment of Rs. 2 lacs, the addition was made to that extent. We uphold the order of the CIT(A) in this regard. However, in respect of addition of Rs. 2 lacs made on account of estimated source of investment in furniture, stock etc, we are of the view that the said addition is on the higher side and the same is reduced to Rs. 1 lac. The Assessing Officer had estimated the income from business at Rs. 1,75,000/- by estimating the sale proceeds at Rs. 35 lacs. Keeping in view the license fee of Rs. 10 lacs paid by the assessee, we find no merit in the stand of the assessee that when presumptive taxation provisions are applied u/s 44AF of the Act, no further addition is warranted. The addition is made on account of initial investment in business, sources of which have not been established by the assessee. In the facts of the case before Hon'ble Punjab & Haryana High Court in CIT V Surinder Pal Anand (supra), the additions were made on account of deposits in the bank account after estimating the income by appl ying the GP rate on the gross receipts. However, in the case of assessee before us, the additions are made on account of the initial investment made at the start of the business i.e. before the business has started and the assessee has started earning income. In the absence of any explanation / evidence being furnished by the assessee to prove its case, there is no merit in the stand of the assessee and the same is dismissed. We uphold the order of CIT(A) in estimating the said income u/s 44AF of the Act by appl ying the net profit rate of 5% on the total sales of Rs. 35 lacs and also addition of Rs. 2 lacs on account of License fee and Rs. 1 lac on account of investment in stock, furniture etc. Accordingl y, the ground Nos. 2 & 3 raised by the assessee are dismissed and ground No.4 is partly allowed.