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2016 (5) TMI 350 - ITAT MUMBAI

2016 (5) TMI 350 - ITAT MUMBAI - TMI - Net 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 perfectio .....

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ction 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 sep .....

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rchases 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 conf .....

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ntentions 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 emer .....

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ransaction 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 th .....

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n 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/- bei .....

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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 - I.T.A. No. 1588/Mum/2010 - Dated:- 4-5-2016 - Shri Amit Shukla (Judicial Member) And Ramit Kochar (Accountant Member) For the Appel .....

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961(hereinafter called the Act ). 2. The grounds raised by the Revenue in the memo of appeal filed with the Income Tax Appellate Tribunal, Mumbai (hereinafter called the Tribunal ) reads as under : 1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of ₹ 10,45,385/- as profit @5% on undeclared sales of ₹ 2,09,07,668/- 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of & .....

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edings without appreciating the fact that there is no supporting evidence of any sale or purchase transaction and the transaction is not reflected in the audited account. 4. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of ₹ 19,55,282/- on account of unexplained investment without appreciating the fact that the assessee failed to furnish any explanation during the course of assessment proceedings. 5. On the facts and circumstances .....

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again none appeared on behalf of the assessee, hence, we are proceeding to dispose off this appeal ex-parte after hearing the learned Sr. DR and on the basis of the material available on record. 4. The assessee is an individual and proprietor of the firm M/s. Saira Impex. The assessee is a consignee agent of M/s. Casio India Company Private Limited and is working on commission basis. 5. During the course of assessment proceedings u/s 143(3) read with Section 143(2) of the Act, the AO observed f .....

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. The assessee was show caused vide notices dated 24.12.2008 and 29.12.2008 by the AO about the afore-stated difference in the sales and why the sales of ₹ 5,61,35,271/- should not be taken instead of sales of ₹ 3,52,27,603/- as shown by the assessee in the Profit and Loss Account submitted with the Revenue . The AO observed that as per clause 3 of the agreement for consignee dated 11.01.2005 with Casio India Company Private Limited , no commission was payable by the said M/s. Casio .....

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losed sale of 2,09,07,668/-was added to the income of the assessee by the AO vide assessment orders dated 31.12.2008 passed u/s 143(3) of the Act. Further, the assessee claimed courier charges of ₹ 9,51,665/- as revenue expenditure. On verification of the agreement for consignee agent between the assessee and Casio India Company Private Limited, it was observed by the AO that the courier expenses are to be reimbursed by the Casio India Company Private Limited . The assessee was show caused .....

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ent orders dated 31.12.2008 passed by the AO u/s 143(3) of the Act, the assessee filed first appeal with the CIT(A). 7. The assessee filed a statement of facts along with the grounds of appeal before the CIT(A), in which it was stated that she was carrying on business as consignee agent of M/s. Casio India Company Private Limited on commission basis. The assessee s books of account were regularly maintained for the businesses carried on by the assessee which were regularly audited as per the pro .....

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AO, which has resulted into various additions resulting into assessed income being computed u/s 143(3) of the Act at ₹ 83,38,000/- , against returned income of ₹ 4,81,383/-. It was further submitted by the assessee during the course of appellate proceedings before the CIT(A) that as per the agreement with Casio India Company Private Limited, no commission was payable to the assessee on sales effected through her for the sale outside the State of Maharashtra. The assessee submitted t .....

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mmission income on ₹ 3,52,27,603/- on sales made within State of Maharashtra instead of ₹ 5,61,35,271/- which was actual sales of the assessee. The AO therefore added 5% to the income of the assessee on the sale outside Maharashtra of 2,09,07,668/-. It was submitted that as per the agreement, the assessee had not received any commission on the sales outside Maharashtra. It was further submitted that her books, record and the statements were not properly prepared and maintained by the .....

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acts from the M/s. Casio India Co. Pvt. Ltd.. It was stated before the CIT(A) by the assessee that these documents are already on record with the AO who had obtained the same directly from the Casio India Company Private Limited by calling information u/s 133(6) of the Act. The assessee requested the CIT(A) that the income from commission be estimated at reasonable rates. 8. The CIT(A) considered the submissions of the assessee and the assessment order of the AO . In view of the fact that the as .....

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med. The CIT(A) found that in the assessment order dated 31.12.2008 u/s. 143(3) of the Act, the AO had added back ₹ 9,51,665/- claimed as deduction of courier expenses in the P & L account by the assessee as per the agreement for consignee agent made between the Casio India Company Private Limited and the assessee, it clearly states that the expenses of courier were to be reimbursed by Casio India Company Private Limited and if this was so then the expenses would not have been incurred .....

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; 39,11,279/- on disclosed sales and commission income so estimated of ₹ 22,99,843/- on undisclosed sales made by the assessee, and taxable income being net profit @15% on aggregate of commission and courier charges as above , was estimated at ₹ 10,74,418/- as net profit from business of the assessee and brought to tax vide orders of the CIT(A) dated 16.12.2009 . 9. Aggrieved by the orders dated 16.12.2009 of the CIT(A), the Revenue filed appeal before the Tribunal. 10. The learned S .....

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377; 3,52,27,603/- on which she has received commission of ₹ 39,11,279/- but she has not declared any income on the undisclosed sale of ₹ 2,09,07,668/-. Similarly, it was submitted that the CIT(A) has added 15% of the courier charges of 9,51,665/- along with commissions on total sales, to estimate the total profit at ₹ 10,74,418/- from business. The Sr. DR stated that the courier charges has been wrongly claimed as expenses because the said expenses were reimbursed by Casio Ind .....

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r. DR and perused the material on record. We have observed that the assessee has entered into an agreement for consignee dated 11.01.2005 with Casio India Company Pvt. Ltd. , whereby there was a sale of ₹ 3.52 crores which was made through the asssessee by Casio India Company Private Limited which was declared to the Revenue , further there was sale of 2.09 crores which was sale made by Casio India Company Private Limited through assessee , which was not disclosed in the return of income f .....

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could be brought to tax by the Revenue. The AO has duly made enquiries with Casio India Pvt. Ltd. u/s. 133(6) of the Act. During the course of appellate proceedings , it was submitted by the assessee that she had given necessary documents/evidences to the counsel but the same were not forwarded to the Revenue during the course of assessment proceedings u/s 143(3) read with Section 143(2) of the Act. She further submitted that the books were not properly maintained and, hence, the income be estim .....

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et profit ratio will be justified . Similarly, with respect to the courier charges of ₹ 9,51,665/-, it was estimated by the CIT(A) to be part of receipt being reimbursement of courier charges and profit ratio of 15% was applied while granting benefit of deduction of expenses. In our considered view, the assessee did concede that her tax consultant has not maintained proper books of accounts and requested for rejection of book results and estimating profit chargeable to tax. The estimates a .....

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rmity is observed in the working of the estimates by the CIT(A), which is hereby ordered to be confirmed. We order accordingly. 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 ass .....

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dingly. This will dispose of grounds 1 & 2 of the revenue s appeal. 12. With respect to ground no.3, during the course of assessment proceedings u/s 143(3) read with Section 143(2) of the Act, the AO observed that as per the AIR information , the assessee had received interest amount of ₹ 4,225/- from Kotak Mahindra Bank Ltd. . The assessee was asked to give details of interest earned from the Kotak Mahindra bank. In this regard the assessee submitted that she had no such bank account .....

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pporting evidences for the source of deposits in the Kotak Mahindra Bank , else the same along with interest of ₹ 4,225/- would be treated as unexplained cash credit u/s. 68 of the Act. The assessee despite being given opportunities by the AO did not discharge her onus u/s 68 of the Act and hence additions of ₹ 27,50,000/- was made by the AO to the income of the assessee u/s 68 of the Act vide assessment orders dated 31.12.2008 passed by the AO u/s 143(3) of the Act. 13. Aggrieved by .....

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been disclosed in the return of income filed with the Revenue. As regards additions of ₹ 27,50,000/- represented by cash deposit of ₹ 5 lacs and deposit of cheques of ₹ 22,50,000/- on different dates with Kotak Mahindra Bank represents trading receipt on sale of electronic items which were purchased from the said Thakkral Computers Private Limited . The assessee submitted that no details were available with respect to deposit of cheques of ₹ 22,50,000/- with the bank , w .....

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t may be estimated @5% as per the provisions of section 44AF of the Act. The CIT(A) considered the submission of the assessee and therefore benefit of ₹ 5 lacs was allowed to the assessee with respect to un-accounted sale in cash of electronic items while the addition to the extent of ₹ 22,50,000/- with respect to deposits of cheques for which no details were furnished by the assessee to satisfy the ingredients of Section 68 of the Act , was confirmed by the CIT(A) and also addition .....

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e had made payment of ₹ 24,55,282/- to Thakkral Computers Pvt. Ltd. through banking channels from the IndusInd Bank which is an bank account duly disclosed and declared to the Revenue and sources of credit in the said bank account stood explained as per the facts emerging from the orders of the authorities below. The assessee has neither disclosed the purchases made from Thakkral Computers Private Limited nor the corresponding sales made , to the Revenue in the return of income filed with .....

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to the revenue while the explanation offered by the assessee is a plausible explanation which keeping in view the factual matrix of the case was accepted by the CIT(A). 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 .....

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e 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 .....

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venue. The AO alleged that the assessee has made investments which are not recorded in the books of account and, hence, the same should be treated as income u/s. 69 of the Act. Despite giving sufficient opportunities, the assessee failed to discharge its onus before the AO. Thus, the AO made an addition of ₹ 24,55,282/- to the total income of the assessee on account of unexplained investment u/s 69 of the Act vide assessment order dated 31.12.2008 passed u/s 143(3) of the Act. 19. Aggrieve .....

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e than 20%, Section 44AF of the Act as contended by the assessee cannot be accepted. The CIT(A) observed that payment of ₹ 24,55,282/- has been made out of IndusInd Bank to Thakkral Computers Private Limited which is explained by the assessee to be the regular bank account of the assessee disclosed to the Revenue in return of income filed with the Revenue, whereby commission income earned by the assessee were credited which were duly offered for taxation in the return of income filed with .....

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is to be brought to tax. As no other details are available , the amount of ₹ 5 lacs was taken as profit earned by the assessee on the transactions which have not been declared and offered for taxation , which was stated by the assessee to be undisclosed / unrecorded sale in cash, which was deposited in bank and stated to be part of the profit of these transactions. The assessee was thus granted a relief of ₹ 19,55,282/- by the CIT(A) and addition was sustained to the extent of ͅ .....

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ies were made with Thakkral Computers Pvt. Ltd. The learned CIT(A) should have called for the remand report from the AO with respect to the additional evidences submitted by the assessee. None appeared for the assessee despite several opportunities given to the assessee , since 2011. 23. We have considered the contentions of the ld. Sr. DR and perused the material on record. We have observed that the assessee has made payment of ₹ 24,55,282/- to Thakkral Computers Pvt. Ltd. out of the regu .....

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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 rel .....

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t first stage the CIT(A) estimated commission income on sales @11% and thereafter allowed relief of deduction of expenses and applied net profit rate@15% of the commission income so estimated @11% on sales. The learned 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%. 25. We have heard the learned Sr. DR and perused the record. The CIT(A) based upon the profitability on disclosed sales has applie .....

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