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2022 (2) TMI 768 - ITAT JAIPURUndisclosed sales - difference between the declared sales and the sales as per the VAT return - HELD THAT:- As decided in President Industries [1999 (4) TMI 8 - GUJARAT HIGH COURT] that entire sales could not be added as income of assessee but addition could be made only to the extent of estimated profits embedded in sales. Further in the case of K Venkatesh [2016 (8) TMI 205 - ITAT BANGALORE] upheld the order of Tribunal by holding that it not the entire sales consideration which is to be brought to tax but only the profit attributable on the total unrecorded sales consideration which alone can be subject to income tax. We are of the view that the entire sale consideration cannot be treated as income of the assessee but the addition could be made only to the extent of estimated profits embedded in sales, thus, in that eventuality, we deem it appropriate to restore the matter back to the file of the A.O. with a direction to make addition only to the extent of estimated profits embedded in sales while keeping in view the GP declared by the assessee on the total sales for the year under consideration. Reasonable and adequate opportunity of hearing shall be provided to the assessee before deciding the matter afresh. Disallowance of interest made by the A.O - HELD THAT:- CIT (A) completely overlooked the fact that the assessee is having capital balance of ₹ 29,19,242/-. The assessee is having building amounting to ₹ 12,28,000/- the other assets of the assessee are comprising the PNB Bonds, Mutual Funds and PPF. The assumption of the ld.CIT(A) that all these assets are financed through unsecured loans does not hold any strength as it is the matter of very common knowledge that Bonds, Mutual Funds and PPF carry very lower rate of interest and unsecured loans carry very high rate of interest hence, no prudent businessman will invest his higher interest rate borrowed funds in the lower fixed income investments hence these investment must have been made out of the capital balance of the assessee and investment in M/s Kanoria Enterprises must have been made out of the unsecured loans and interest incurred on these loans deserves a complete allowance. As regards the suspected excessive interest, we are of the view that this is the misconception of the ld.CIT(A) as he is comparing the closing balances of unsecured loans with total amount of interest paid. Out of the total amount of ₹ 2,63,659/-, ₹ 15,790/- were paid as brokerage for arranging the loans. ₹ 53,049/- were paid to the HDFC Bank Ltd and remaining interest of ₹ 1,94,820/- were paid to various parties who were not related to the assessee and all the payment have been made through banking channels only. Therefore, considering the totality of facts and circumstances of the case, we found merit in the contention of the ld. AR and therefore, we direct to delete the addition made qua this issue.
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