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2023 (4) TMI 1277 - AT - Income TaxEstimation of income on undisclosed sales - declaration made by the assessee during the course of survey - Income estimated on undisclosed turnover against the undisclosed excess stock of gold jewellery and bars found during the course of survey - HELD THAT:- As application of income earned is found in excess stock found and also in cash deposited in the bank account. The source of earning is from profit earned on undisclosed turnover and application is in stock and cash deposited in Bank. As cash deposited in bank is being adjudicated separated, the assessing officer is directed to telescope the gross profit estimated on turnover outside the books of accounts against the excess stock found. CIT(A) directed the assessing officer to give the telescoping effect of income estimated on undisclosed turnover against the undisclosed excess stock of gold jewellery and bars found during the course of survey. Hence separate addition made by the assessing officer was deleted by CIT(A). We have gone through the above findings of ld CIT(A) and noted that there is no infirmity in the order passed by CIT(A). The conclusions arrived at by the CIT(A) are, therefore, correct and admit no interference by us. We, approve and confirm the order of the CIT(A) and dismiss the ground nos. 1 and 2 raised by the Revenue. Addition on account of cash deposited during the demonetization period - assessee did not explain the source of cash deposited - HELD THAT:- It is not a case where turnover outside the books of accounts was detected. The plea of the assessee could have been accepted in the later case and not in the former case as the assessee has deposited the entire cash in the bank account. Therefore, the alternative plea of the assessee was rejected. In view of the above facts, the ld CIT(A) observed that the addition on cash deposit sustained is Rs. 61,80,827/- by the cash in hand of Rs. 26,47,736/-. The net addition sustained was at Rs. 35,33,091/-. The assessee got relief of Rs. 6,76,66,909/- (6,23,35,144 + 26,29,991+26,47,736). CIT(A) directed the assessing officer to tax the said amount of Rs. 35,33,091/- (7,12,00,000- Rs. 6,76,66,909) u/s 68 of the Act as same was generated not from actual sale of jewellery or bullion, therefore, ld CIT(A) held the claim of sale as bogus as evidenced from entries in computer. Accordingly, the ld CIT(A) directed the assessing officer to tax the amount of Rs. 35,33,091/- as per the provisions of section 115BBE of the Act. We do not find any infirmity in the order of Ld. CIT(A), hence ground No. 3 of Revenue is dismissed. Investment in undisclosed stock - business income OR undisclosed investment - HELD THAT:- The source of income was explained and is apparently established and hence section 115BBE of the Act, is not applicable for such business receipts. The provisions of Sections 68 and 69 are not applicable for trading transactions like deposit of cash out of cash sales and excess closing stock. For that reliance can be placed on the judgment of case of Shilpa Dyeing & Printing Mills Ltd [2015 (7) TMI 691 - GUJARAT HIGH COURT] Therefore, we direct the AO to tax the excess stock/sale, if any, under the head business income, (not u/s 115BBE) and amount of Rs. 35,33,091/- should be taxed at the rate of 2.5% (normal profit rate of assessee). Quantification of excess stock - credit of disclosures during the course of survey and subsequently in the return filed - In assessment year 2017-18, when the survey was conducted, then assessing officer reopened the previous assessment years namely, assessment years viz: 2013-14, 2014-15, 2015-16 and 2016-17 and re-estimated the profit on turnover at the rate of 5%. On appeal, ld CIT(A) reduced profit to 2.5%. We note that assessee has declared cash sales/PMGKY Scheme (sales bill reversed-So Stock increased) at Rs. 5,00,00,000/-, hence the assessee is entitled for telescoping of these previous assessment years which were completed after assessment year 2017-18. Therefore, we direct the assessing officer to grant the telescoping of these previous assessment years viz: 2013-14, 2014-15, 2015-16 and 2016-17. Estimation of NP - Suppressed sale of jewellery and suppressed sale of bullion - HELD THAT:- CIT(A) noted that compared to the average net profit disclosed for these preceeding assessment years, the 5% net profit estimated by the AO is on a higher side. Hence, if the net profit is taken at 2.5% of the unrecorded/suppressed turnover of jewellery which is about 0.87% above the average net profit of 1.63% would meet the ends of justice. Similarly, for bullion the assessee has the separate record of only A.Y 2014-15 and 2015-16 where the average net profit is a loss. In absence of the separate details for bullion for all the proceeding assessment years, the prevalent market rate of 0.2% on sale on bullion would be the appropriate net profit rate. Accordingly, ld CIT(A) directed the assessing officer to estimate the net profit at the rate of 2.5% on the suppressed sale of jewellery and 0.2% on suppressed sale of bullion. This way, ld CIT(A) allowed the appeal of the assessee for all these 3 assessment years partly. We do not find any infirmity in the above conclusion reached by ld CIT(A). That being so, we decline to interfere with the order of Id. CIT(A) in deleting the aforesaid additions. His order on this addition is, therefore, upheld and the grounds of appeal of the Revenue are dismissed.
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