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2014 (10) TMI 181 - ITAT LUCKNOWAddition on suppressed sales - Difference between closing cash in hand Held that:- During the course of survey operation, no hard copy of the books of account were found - The assessee has maintained the accounts in the computer and from the computer, the survey team has obtained details of sales and opening & closing cash balance - CIT(A) has also extracted the details of total sales according to which the total sales as per the details was at ₹ 21,88,28,854/- in AY 2007-08 - the assessee has shown total sales of the year - The difference was considered to be the suppressed sales by the CIT(A) - CIT(A) has further added the suppressed sales computed by the AO after rejecting the books of account u/s 145(3) of the Act - the difference was considered to be suppressed sales by the CIT(A), there was no justification in enhancing the suppressed sales by the CIT(A) by making addition of the suppressed sales estimated by the AO without any basis after rejecting the books of account of the assessee - During the AY 2007-08, the total suppressed sales would only be of ₹ 5,73,69,778/-. Wherever the details are available from the computer, there is no justification in estimating the suppressed sales by the AO after rejecting the books of account - the mode of computation of suppressed sales on the basis of the material impounded during the course of survey operation is proper/correct - nothing has been brought on record by the Revenue with regard to the unexplained investment in the purchase - addition of the entire suppressed sales is not called for, only gross profit worked on the sales is required to be added to the total income of the assessee. Whether the gross profit is to be estimated or net profit is to be worked out for making the addition Held that:- The initial gross profit is to be worked out, the other indirect expenses are to be reduced to work out the net profit - the other indirect expenses have already been booked while computing the normal income of the assessee as per books of account - the gross profit rate is to be applied - the gross profit rate was declared between 10.82% and 13.99% - Since in other years, the gross profit was declared at lesser rate, the gross profit declared by the assessee during the relevant year is to be adopted to compute the income from suppressed sales - in AY 2007-08, the gross profit rate at 14.10% is to be applied on the suppressed sales in order to compute the total income from sales outside the books of account - in AY 2008-09, the gross profit rate is to be applied at 12.02% as disclosed by the assessee to the suppressed sales in order to compute the income from sales made outside the books of account - the addition of the gross profit worked out in terms indicated above is required to be added to the total income of the assessee. Difference in closing cash balance Held that:- The survey team has obtained sheets of cash book maintained in the computer, wherefrom different figures were noted as on 31.3.2007 and 1.4.2007 - Though the assessee has contended that it was on account of glitches in the computer, but the onus is squarely upon him to explain how such substantial amount of opening cash balance was taken on 1.4.2007 - It is for the assessee to explain as to how cash balance moves further and how much cash balance was shown in succeeding dates - In the absence of proper explanation of the assessee, difference in opening and closing cash balance is required to be added under section 68 of the Act and this addition is possible only in AY 2008-09 - But there was force in the contention of the assessee that if addition of the difference in opening and closing balance is called for, the credit of the income generated on suppressed sales is to be given therefrom and the net amount is to be added on account of difference in closing and opening cash balance, because the income generated from suppressed sales has to be taken into account while computing the opening cash balance as on 1.4.2007 - profit/income generated on suppressed sales by applying the gross profit rate be reduced from the difference in closing balance as on 31.3.2007 and to make addition of the balance amount on account of difference in closing balance and opening balance thus, the matter is to be remitted back to the AO for re-computation Decided in favour of assessee.
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