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2016 (5) TMI 350 - AT - Income TaxNet profit determination - AO estimated profit @5% on the said undisclosed sale - CIT(A) estimated the commission income @11% on the said undisclosed sale - Held that:-The estimates are to be made keeping in view the background of the business of the assessee and the available records and is to be a reasonable and fair estimate of income to be brought to tax which necessarily involves estimation based on some guess work and the same cannot achieve perfection or precision to yield exact income which can be brought to tax . The CIT(A) made an estimate of the earnings of the assessee keeping in view the entire background of the case and in our considered view, no defect or infirmity is observed in the working of the estimates by the CIT(A), which is hereby ordered to be confirmed. However, with respect to courier charges of ₹ 9,51,665/- being included in the income of the assessee on estimated profit rate basis as set out above, direction for limited verification are hereby issued to the AO to verify whether the courier charges of ₹ 9,51,665/- debited by the assessee to the Profit and Loss account and claimed as an expenses by the assessee in the return of income filed with the Revenue, as per the agreement with Casio India Pvt. Ltd. are to be part of gross revenue or were reimbursed by Casio India Company Pvt. Ltd. separately and if these expenses are found to reimbursed by the Casio India Company Private Limited separately, then the total amount of courier charges of ₹ 9,51,665/- claimed by the assessee as revenue expenses will be disallowed, otherwise the income as computed by the CIT(A) is confirmed. We order accordingly Undisclosed cash deposits - Held that:- The total payment made for the undisclosed purchases made from Thakkral Computers Private Limited through the bank account is 24,55,282/- and hence there will also be sales corresponding to the said purchases. Both the sales and purchases with respect to these electronic items so purchased from Thakkral Computers Private Limited is not declared and disclosed by the assessee to the Revenue in the return of income filed with the Revenue. There are cheques deposited of ₹ 22,50,000/- on different dates in the Kotak Mahindra Bank Limited by the assessee for which no explanations was offered by the assessee to satisfy the ingredients of Section 68 of the Act which was added by the AO to the income of the assessee and confirmed by the CIT(A). With respect to the cash deposit of ₹ 5 lacs in Kotak Mahindra Bank , the assessee came out with an explanation that the same is part of sale proceed in cash of the electronic items purchased through Thakkral Computers Private Limited and the same should be treated as part of sale proceeds in cash, which explanation was accepted by the CIT(A) being plausible and bona-fide explanation in the absence of any incriminating material brought by the Revenue to disprove the contentions of the assessee and in our considered view, we donot find any infirmity in the orders of the CIT(A) which we confirm and the action of the CIT(A) granting relief of ₹ 5,00,000/- is upheld. Unexplained investment u/s 69 - Held that:- We have observed that the assessee has made payment of ₹ 24,55,282/- to Thakkral Computers Pvt. Ltd. out of the regular bank account with IndusInd Bank whereby the credits are duly offered for tax by the assessee as per the facts emerging from the orders of the authorities below, the said payments of ₹ 24,55,282/- to Thakkral Computers Pvt. Ltd. had not been recorded in the books of account. The assessee has come forward with the explanation that this represent unexplained purchases and correspondingly unrecorded sales were made. It was further submitted that 5% of the investment be treated as profit u/s. 44AF of the Act and the same should be brought to tax. The CIT(A) has estimated profit at ₹ 5 lacs on these transaction based on the explanation of the assessee that ₹ 5 lacs deposited in cash in bank account with Kotak Mahindra Bank represents cash sales not disclosed to the Revenue with respect to the electronic items purchased from Thakkral Computers Private Limited and represents part of profit from these unrecorded purchase and sale of electronic items and the CIT(A) gave relief of ₹ 19,55,282/- as the sources of making payment were duly explained to be commission income credited in the IndusInd Bank which was offered for tax by the assessee and the bank account with IndusInd Bank was duly declared and disclosed by the assessee to the Revenue . We do not find any infirmity in the orders of the CIT(A) which we confirm and uphold the same Decided against revenue Double stage of estimation - DR submitted that the CIT(A) erred in giving relief of double stage by first estimating commission @11% on sales and then applying profit rate of 15% - Held that:- . No explanation with evidences has been submitted by the assessee before the authorities below to explain the income which need to be brought to tax in context of the undisclosed sale of ₹ 2.09 crores made through the assessee by Casio India Company Private Limited. The CIT(A) in a very reasonable and fair manner first estimated commission income @11% on undisclosed sale made and on the courier charges , which was in parity with and equivalent to the ratio of commission income of ₹ 39,11,279/- being given by Casio India Company Private Limited to the assesssee on disclosed sale of ₹ 3.52 crores which is also confirmed by the TDS certificate and the books of account of the assessee and on the same ratio estimated 11% commission on undisclosed sales of ₹ 2.09 crores and, thereafter, the CIT(A) applied the 15% ratio of profit on commission income on disclosed sale and undisclosed sales whereby giving benefit of the deduction of expenses to the assessee. Hence, the action of the CIT(A) cannot be faulted with as the estimation has been done by the CIT(A) on a reasonable and fair basis as some guess work is always involved in estimation and the same cannot be made with exact precision and perfection to arrive at exact income. Hence, we donot find any infirmity in the orders of the CIT(A) which we uphold and confirm - Decided against revenue
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