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2018 (8) TMI 121 - AT - Income TaxEstimation of suppressed turnover - assessee's contentions that quantification of undisclosed turnover is only an estimate based on figures in pencil with respect to few plots only and that there is no corroborative evidence - Held that:- Before us also assessee has not furnished any evidence to counter the working of AO. Since there is some basis for working out the so called suppressed turnover and assessee’s main contentions are on the reconciliation of the said working, we are of the opinion that estimation of turnover based on the so called registers/entries in pencil cannot be faulted. Thus, the grounds on this issue (Ground Nos. 1 to 6) are accordingly rejected. Determination of suppressed turnover - Held that:- Since prima-facie future sales cannot be considered as suppressed turnover for the period upto date of search, the gross receipts to that extent requires to be excluded in quantifying the suppressed turnover for the impugned assessment years. Since this aspect requires examination by the AO, we direct the AO to exclude the amounts pertaining to plots unsold as on date of search, so as to quantify the suppressed turnovers upto AY. 2014-15. In the year 2015-16 & 2016-17 i.e., of subsequent years, AO is free to verify this aspect but the unsold plots as on date of search cannot be considered for suppressed turnover particularly for quantifying the turnovers on the ratio of accounted turnover in the impugned assessment years. AO is directed to examine this aspect and exclude the turnover as directed above while determining the suppressed turnover. Grounds are considered allowed for statistical purposes. Estimation of profit - Held that:- In this case, the quantification itself was done on the third party registers, where only the indicative sale prices were recorded. Since more than 70% of the turnover was recorded and the profit at 4% was accepted by AO, we are of the opinion that estimation at 12.5% is reasonable on the facts of the case. Honourable Jurisdictional High Court in the case of ACIT Vs. Ravi Foods Pvt. Ltd., has confirmed net profit rate of 3.91%. That case however, pertain to a food business case, but not real estate. Generally in real estate/contract cases, profit is estimated at 12.5%. As assessee has mostly sold real estate plots, we are of the opinion that estimation of income at 12.5% on the suppressed turnover will meet the ends of justice. Accordingly, modifying the order of CIT(A), we direct the AO to determine the profit at 12.5% of the determined suppressed turnover. Ground on this issue is considered partly allowed. Disallowance u/s 40(a)(ia) - Held that:- AO has not specified whether the assessment order has been passed earlier for AY. 2013-14. Even otherwise by that time the search has happened and assessments have been taken up, the proceedings for AY. 2013-14 have already become crystallised and AO can only consider the undisclosed income on the basis of the seized material or any other information which has come to the knowledge of AO. Since there is no evidence pertaining to the issues on which disallowance was made, we agree with the findings of Ld.CIT(A). As seen from the table mentioned in the assessment order regarding various disallowances, it is also not verifiable on what basis AO has quantified the violations u/s. 40(a)(ia) and 40A(3) of the Act, the details of which are not forthcoming from the order. There is no merit in the contentions of Revenue. - revenue appeal diminished.
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