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2007 (7) TMI 356 - AT - Income TaxComputation Of Undisclosed Income - search and seizure operations - incriminating documents and other evidences showing suppression of sales found - estimated the turnover for three earlier years of the block period - seized material related to 57 days only - Violation of the Principles of Natural Justice - Production and sale of Rawa from wheat - HELD THAT:- In the case under consideration, whatever undisclosed income on the basis of material is found at the time of search has been offered by the assessee in the return filed for the block period. It is also a fact that in the statement recorded it was admitted that such suppression of income was not there in earlier years. Thus, we find that the action of the AO is arbitrary and not based on material found at the time of search nor it is based on the statement recorded at the time of search. Such addition merely on the basis of arbitrary or notional income on the assumption that since there was suppression of turnover for the period 1st April, 2002 to 21st Jan., 2003 and therefore, by same proportion there was suppression of turnover/income for the earlier years and subsequent year/period, is not sustainable. There is no suppression of turnover or sales or unaccounted business of earlier years; there is no question of making any addition on account of investment for running the unaccounted business for earlier years/subsequent period to search. We, therefore, delete the addition sustained by the CIT(A) on account of suppression of turnover and enhanced by the CIT(A) on account of capital employed for running the unaccounted business. So far as the ground regarding net profit rate of 4 per cent is concerned, this ground becomes infructuous as we have held that there was no unaccounted turnover in earlier years. Therefore, the question of applying 4 per cent net profit rate does not arise. The assessee's appeal is allowed. In the result, Appeal of the assessee is allowed, Appeal filed by the Revenue and CO No. filed by the assessee are dismissed.
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