TMI Blog2017 (6) TMI 561X X X X Extracts X X X X X X X X Extracts X X X X ..... ermined above at 8% on total turnover of ₹ 1058.91 lacs. Accordingly the grounds raised by the assessee are partly allowed. - I.T.A. No.2254/Kol/2014 - - - Dated:- 2-6-2017 - Shri N. V. Vasudevan, Judicial Member And Shri M. Balaganesh, Accountant Member For the Appellant : Shri Miraj D. Shah, AR For the Respondent : Shri M. K. Chanda, JCIT, Sr. DR ORDER Per M. BALAGANESH, AM 1. This appeal by assessee is arising out of order of CIT(A)-XXX, Kolkata-3 vide appeal No. 210/CIT(A)-XXX/Cir-47/2013-14 dated 28.10.2014. Assessment was framed by DCIT, Central Circle VIII, Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) for A.Y 2011-12 vide his order dated 23.09.2013. 2. Though the assessee had raised several grounds, the central issue to be decided in this appeal is as to whether the authorities were justified in estimating the net profit of the assessee in the facts and circumstances of the case. 3. The brief facts of this issue is that the assessee is a partnership firm engaged in the business of manufacturing of tea blending machine and equipments, apart from earning income by way of labour charges, crane ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for pre-survey as well as post-survey periods are not satisfactorily found as correct and complete . Accordingly he estimated the gross profit for the pre-survey period (i.e 1.4.2010 to 18.1.2011) at 15% of turnover of pre-survey period and made an addition of ₹ 82,42,786/- thereon. 4. The ld CITA observed that there is no basis for the action of the ld AO for estimating the G.P for pre-survey period at 15% of turnover and observed that the assessment is based on survey report and is on the background of commitment given by the assessee to pay ₹ 25.5 lacs of tax on corresponding income of ₹ 85 lacs that the assessee agreed that it earned in the relevant previous year. The ld CITA observed as under:- 5.1. The Survey Officials and the Appellant seem to have rushed to the conclusion that the estimated income for the relevant year could be about ₹ 85 lacs and so the Appellant has apparently agreed to pay the tax of ₹ 25.5 lacs on the said estimated income of ₹ 85 lacs. In the course of assessment, it appears that the accounts have been dressed up because there are too many contradictions in the accounting results. The profit in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause even if the physical inventory is taken as correctly valued by the Survey Officials at ₹ 3,57,99,493/-, the difference of about ₹ 72 lacs from the book stock as on the Survey date may be taken unaccounted and unrecorded sales. So any working of the gross profit must include ₹ 72 lacs worth of sales of the stock to arriave at a correct or reasonable figure of gross profit. If this amount of ₹ 72 lacs is included which is equivalent to putting in place of ₹ 3,57,99,493/-, ₹ 4.30 Crs, then the figure of gross profit should approach that shown by the submission and percentage comes to 17.52% but this requires one modification ₹ 72 lacs about shortage of stock is valued only at the cost whereas the sales may be assumed to be including some profit and extrapolating the gross profit of the earlier years or even of current year, after considering the adjustment that should arise because of unrecorded sales of ₹ 72 lacs then the profit of the pre-survey period will increase by ₹ 72 lacs multiplied by G.P. i.e about ₹ 11 lacs. So the pre-survey period will show the profit of ₹ 1.67 Cr. + 11 lacs which comes to a fig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the matter otherwise the remuneration to partners would have been not increased if the appellant was to honour the commitment made to survey officials. Some of the absurd results in the post survey apparently is because of some concern to show more profit in the current year than arising out of the book figures and therefore I find it reasonable to allow the adjustment of excess ₹ 9 lacs paid to the partners as remuneration to partners has already been subjected to tax. It is in the interest of justice to hold that for the purpose of assessment of tax of the firm, the total income should be taken at ₹ 82 lacs 9 lacs = 73 lacs. Thus, balance addition of ₹ 82L +Rs 24L ₹ 73 L = ₹ 33 lacs is deleted . 5. Aggrieved, the assessee is in appeal before us on the following grounds:- 1. FOR THAT when the addition made by the Assessing Officer did find favour at the appellate stage, the trading results of the appellant firm should have been accepted at the appellate forum. 2. FOR THAT the Ld. Commissioner of Income Tax (Appeals) - XXX, Kolkata wrongly placed much weightage and reliance upon the statement recorded at the time of survey, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... though strictly the percentage of profits prescribed thereon u/s 44AD / 44AF of the Act cannot be made applicable to the facts of the instant case in view of higher turnover. However, it is already well settled that the percentage of profits prescribed in the said sections would be an indicator for estimation of reasonable profits of the assessee in the event of book results not reliable. The past history of the assessee also would be a good indicator of performance of the assessee, but in the instant case, the details of the same are not available on record. But during the year under appeal, the assessment was framed based on the survey conducted by the department and disclosure given by the assessee at the time of survey that its income for the year under appeal could be estimated at ₹ 85 lacs and tax thereon to the tune of ₹ 25.5 lacs would be paid in due course. But the assessee had not complied with the disclosure given at the time of survey while filing the returns. It is well settled that no addition could be made merely based on the statement given during survey without bringing any corroborative evidence on record. Reliance in this regard is placed on the decis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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