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2022 (9) TMI 865 - ITAT VISAKHAPATNAMUnreported income detected during the survey - Unaccounted gross receipts without allowing deduction towards expenses in this regard - expenditure having been incurred in respect of unrecorded sales - HELD THAT:- It is imperative that certain expenses would have been incurred in respect unrecorded sales though not recorded in the books of accounts. During the survey proceedings, while answering to Q.No.30, the assessee stated that “No, the entire expenditure related to these receipts is not accounted for in the books of accounts.” Therefore it is ascertained by the assessee that there exists unexplained expenditure relatable to the unaccounted receipts. The computation of profit after inclusion of unaccounted sales in the turnover would necessarily require deduction of unrecorded expenses. The Courts in such cases have taken the view that there is a presumption of expenditure having been incurred in respect of unrecorded sales. We find that taxing the entire gross receipts, where the Net Profit ratio is at 82.49%, AO for the relevant assessment year is not justifiable by any stretch of imagination. Similarly the plea of the AR to adopt the Net Profit ratio of 16% based on the assessment order passed for the AY 2019-20 also could not be accepted because of the fact that the assessee himself has admitted a net profit ratio of 17.37% with respect to accounted and unaccounted income of the assessee for the AY 2016-17. We are of the considered view that the net profit ratio shall be computed at the rate of 18%, which is as accepted by the assessee during the survey proceedings. AO is directed accordingly.
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