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2019 (4) TMI 1831 - AT - Income TaxDetermination of profit of unaccounted sales - gross profit v/s net profit - HELD THAT:- As relying on Shri Hariram Bhambhani [2015 (2) TMI 907 - BOMBAY HIGH COURT] and BALCHAND AJIT KUMAR [2003 (4) TMI 76 - MADHYA PRADESH HIGH COURT] we direct the Assessing Officer to assess the income from undisclosed sales in question by applying the net profit rate in place of the “gross profit rate” on undisclosed sales. The net profit rate shall be that which the assessee had disclosed in its regular books of account for the said Assessment Year on recorded sales. In the result, this ground of the assessee is allowed in part. Disallowance u/s 40A(3) and 40(a)(ia) can be made when profits have been estimated as a percentage of turnover - HELD THAT:- We delete the disallowance made u/s 40A(3) and 40(a)(ia) of the Act as in this case, the income has been estimated by the Assessing Officer. Hence, we allow this ground of the assessee. Taxation of excess stock found by the revenue during the course of survey - HELD THAT:- Survey done u/s 131 of the Act, for the Assessment Year 2009-10, the survey team found difference between the physical stock and the book stock. The physical stock was more than the stock recorded in the books. The difference was assessed as income. The ld. Counsel for the assessee relied on the judgment in the case of Principal Commissioner Of Income vs M/S. Subarna Rice Mill [2018 (8) TMI 1475 - CALCUTTA HIGH COURT] and argued that in such a situation, only the gross profit on such stock can be taxed. This judgment was followed by the ITAT Kolkata Bench in the case of DCIT vs. Smt. Madhu Chhanda Sirkar [2018 (9) TMI 1775 - ITAT KOLKATA] - We direct the Assessing Officer to tax only the gross profit embedded in the excess stock found for the Assessment Year. The balance addition is hereby deleted. In the result this ground of the assessee is allowed in part.
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