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2015 (10) TMI 2309 - GUJARAT HIGH COURT

2015 (10) TMI 2309 - GUJARAT HIGH COURT - TMI - Addition on unaccounted sales - assessee challenging the rate of gross profit estimated at 10% on the ground that it was on the higher side - Held that:- Entire sales cannot be added as income of the assessee but addition can be made only to the extent of estimated profits embedded in the sales and that the income from suppressed sales should be determined by assessing the gross profit of the assessee

It is evident that the Commissioner .....

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hus, ultimately the gross profit has been determined on the basis of an estimate. As to whether the estimate of gross profit by the Commissioner (Appeals) is to be accepted or that by the Tribunal is to be accepted, cannot in any manner be said to give rise to a question of law, much less, a substantial question of law, so as to warrant interference. - Decided against revenue. - Tax Appeal No. 527 of 2015, Tax Appeal No. 528 of 2015 - Dated:- 7-9-2015 - Harsha Devani And A. G. Uraizee, JJ. For t .....

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of 2015. "Whether the decision of ITAT is perverse in dismissing the appeal of the revenue where the CIT(A) has restricted the addition upto 10% i.e. ₹ 42,07,397/- instead of addition of ₹ 4,20,73,972/- made by AO of unaccounted sales, despite the fact that AO has clearly noted that assessee has debited all the expenses in regular books of accounts and assessee has failed to prove otherwise at any stage ?" TAX APPEAL No.528 of 2015. "Whether the decision of ITAT is pe .....

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eriod is the previous year 2006-07. In this case, a survey action under section 133A of the Act was conducted at the business premises of the respondent assessee on 3.3.2008. Out of the five Directors of the assessee company, one of the Directors Shri Rajesh R. Bansal on behalf of the company, voluntarily admitted that the assessee company had earned unaccounted income to the tune of ₹ 13,01,00,000/- and promised to pay tax on the unaccounted income disclosed by way of admission. However, .....

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lection clerks of the group were recorded, wherein they had admitted that benami cheques which were received by way of payments to the assessee company were deposited with a local shroff Mr. Jaikumar Periwal, and cash was received back. During the survey, Shri Sanjay Sudhrania admitted that he maintains parallel accounts on USB hard disc operated through his laptop. During the year under consideration, an amount of ₹ 4,72,05,175/- had been discounted by the assessee from the Shroff, as rev .....

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rned to Shri Sudhrania. The Assessing Officer, after analysis of the material on record, estimated the percentage of proportionate discount at 10.87%, which amounted to ₹ 51,41,203/- and granted deduction accordingly out of the total unaccounted process charges. Accordingly, an amount of ₹ 4,20,73,972/- came to be added to the total income of the assessee company. The assessee carried the matter in appeal before the Commissioner (Appeals), who directed the Assessing Officer to estima .....

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d senior standing counsel for the appellant assailed the impugned order by submitting that the Tribunal has failed to appreciate that the Assessing Officer has considered the material on record, namely, data contained in the Laptop of Shri Sanjay Sudhrania wherein the accounts pertaining to processing charges received by the assessee company had been entered regularly. It was submitted that the Tribunal has failed to consider that the assessee had debited all expenses relating to unaccounted sal .....

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ified in estimating the gross profit at 6.50%. It was, accordingly, submitted that the appeals deserve consideration on the questions as proposed or as may be deemed fit by this court. 5. This court has considered the submissions advanced by the learned counsel for the appellant and has perused the impugned orders passed by the Tribunal as well as the orders passed by the lower authorities. 6. The facts as emerging from the record reveal that the Assessing Officer rejected the books of accounts .....

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t the entire sum of ₹ 4,72,05,175/- is to be treated as assessee s additional receipt not accounted for in its regular books. The Assessing Officer allowed an amount of ₹ 51,31,203/- at the rate of 10.87% as the total discount ceded by the assessee and calculated the net unaccounted receipt after discount at ₹ 4,20,73,972/-. As regards the claim of the assessee on other counts, the Assessing Officer was of the view that such expenses had already been claimed in the assessee s b .....

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be ignored. The Commissioner (Appeals) noted that the Assessing Officer had treated the entire additional turnover of ₹ 4,72,05,175/- as net income of the assessee and granted deduction on estimated basis for discount granted by the assessee for the reason that the entries for discount were reflected in job charges receipt. However, at the same time, the entries of all other expenses as claimed to be unaccounted were also reflected in the accounts maintained by the Director on his Laptop f .....

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er found force in the arguments of the authorised representative that the co-existence of evidences of unaccounted income and unaccounted expenditure cannot be ignored in toto as the department cannot approbate and reprobate the same document at the same time. The Commissioner, however, noticed that the assessee had also failed to prove categorically that the impugned unaccounted transactions as reflected in the combined books of accounts maintained on the laptop were not accounted for in the re .....

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ee. The Commissioner (Appeals) was, therefore, of the view that there was no alternative but to resort to estimation of gross profit on the basis of available records and past trend as well as the prevailing rate of net profit in case of similar industries as the books of accounts maintained by the assessee were not correctly reflecting the profit of the assessee and had rightly been rejected under section 145(3) of the Act. The Commissioner (Appeals) observed that the assessee has incurred gros .....

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it of the assessee concern. Considering the past trend of loss, the margin of profit in the earlier year and the large volume of turnover and also the possibility that some expenses might have been incorporated in the regular books of accounts, the Commissioner (Appeals) was of the view that the profit margin from the unaccounted additional turnover should be on the higher side as compared to the margin shown in the regular books of accounts due to which it could be safely assumed that the asses .....

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the Assessing Officer had accepted the expenses shown in regular books as correct and had only taken receipt from the data found in the Laptop and had given absolutely no reason as to why only receipt was taken from the Laptop data and why expenses appearing in the Laptop data were not taken into consideration. The Tribunal noted that it was not the case of the revenue that the data found in the Laptop showed the actual net income of the assessee was more by ₹ 4,20,73,972/- than the income .....

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as upon the decision of this court in the case of CIT v. President Industries, (2012) 258 ITR 654 (Guj.), wherein it has been held that the entire sales cannot be added as income of the assessee but addition can be made only to the extent of estimated profits embedded in the sales. The Tribunal, accordingly, did not find any merit in the appeal preferred by the revenue and dismissed the same. 9. Thus, in the assessee s appeal challenging the rate of gross profit estimated at 10% on the ground t .....

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artment, the gross profit rate disclosed by the assessee at 4.85% was on the lower side and, accordingly, estimated the gross profit of the unrecorded receipt at 6.50%. The Tribunal, accordingly, modified the order passed by the Commissioner (Appeals) to that extent and directed the Assessing Officer to accept the gross profit rate of the suppressed receipt of ₹ 4,20,73,972/- at 6.50%. 10. From the findings recorded by the Tribunal insofar as the appeal preferred by the revenue before the .....

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