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2023 (7) TMI 1045 - ITAT PUNEUnrecorded sales - data as found by the custom authorities during the course of search - AR argued that achieving this level of unrecorded sale was humanly impossible considering the capacity of the assessee company and hence the amount of such unrecorded sales be reduced - HELD THAT:- We are disinclined to accept the assessee’s contention for the obvious reason that the figure of unrecorded sales was deduced from the data found in the assessee’s computer during the course of search by Central Excise authorities. Not only this, even the director of the assessee company also accepted the unrecorded sales at this level during the course of search. The later retraction is of no avail because the data from the computer corroborated the amount of unrecorded sales. We, therefore, reject the assessee’s version about the amount of unrecorded sales at a level lower than that taken note of by the authorities below. GP estimation - CIT(A) reduced it to the declared gross profit rate at 4.86% for the year under consideration - Tax is not charged on the amount of sales but on the income embedded in such sales. It clearly emerges from the discussion made in the assessment order that not only the sales but also the purchases were unrecorded. The assessee was into manufacturing the goods outside the books of account to evade excise duty. Since both the sales and corresponding purchases were unrecorded, it is but natural that only the profit element could have been added and not the amount of sales in entirety. We, therefore, affirm the view taken by the ld. CIT(A) in restricting the addition to the level of gross profit rate declared by the assessee for the year under consideration. The grounds taken by the assessee as well as the Revenue in this regard stand dismissed. Addition on account of working capital required for manufacturing the goods outside the books of account, which was reduced by the ld. CIT(A) to 50% - In the original assessment, the AO estimated suppressed production on the basis of higher electricity consumption and also made addition towards working capital required for purchase of raw materials and day-to-day activities. The ld. CIT(A), firstly, sustained the addition at the level of the gross profit rate applied on the undeclared sales and deleted the addition towards the working capital. Both the assessee as well as the Revenue came up in appeal before the Tribunal. The Revenue raised in [2016 (11) TMI 1742 - ITAT PUNE] challenging the deletion of addition towards working capital. Tribunal, upheld the deletion of addition on account of working capital. Since the issue under consideration is fully covered by the order of the Tribunal in assessee’s own case for the year under consideration itself, we are satisfied that no addition was called for on account of working capital required for the suppressed production and the same was rightly deleted. The ground of the assessee is allowed and that of the Revenue is dismissed. Addition of cash deposited in the bank account of the three employees - It is but natural that the cash realized on unrecorded sales was utilized for making purchases as well as meeting expenses in addition to deposit of Rs. 79.04 lakh. Since we have upheld the addition of Rs. 3.90 crore towards profit on unrecorded sales, which is far in excess of amount of bank deposits of Rs. 79.04 lakh, we hold that the ld. CIT(A) was justified in deleting the addition to this extent. Addition u/s. 40A(3) - cash purchases for effecting unrecorded sales - Amount Not added in the computation of total income because the amount of unrecorded sales was added - HELD THAT:- As there is no specific reference to any cash purchases exceeding the prescribed amount, warranting disallowance u/s 40A(3) of the Act. In fact, the addition on account of such unrecorded business was made by the AO on the basis of unrecorded sales and sustained in the first and the second appeals on the basis of gross profit rate applied on such unrecorded sales only without any reference to any specific amount of purchases in cash. We, therefore, hold that the grievance of the Revenue on the not-made addition by the AO u/s 40A(3) of the Act is uncalled for. This ground is, therefore, not allowed.
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