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TMI Blog2024 (9) TMI 1444X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment order in length and this unaccounted sale was not the part of the regular books of accounts 2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in considering the 5% NP as reasonable without appreciating the fact that the 5% NP was shown by the assessee in his regular books after claiming all the expenses, hence, NP from unaccounted sale should be more that the normal NP and therefore, AO has adopted 8% NP very leniently and reasonably. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred also in holding that the additional income declared by the assessee of Rs. 75 lakhs covers NP at the rate of 5% without appreciating the fact that the additional income offered was in general nature and the findings of the AO to arrive at the NP at the rate of 8% is based on the incriminating material seized during the search. 4. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting addition of Rs. 78,93,431/- on account of estimated unexplained expenditure holding that one has been estimated by the AO rejecting the books of accounts the source of expenditure relating to such turnover on which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cerned A.Y., the Ld A.O. has made the additions to the returned income of the assessee on three counts i.e. (i) Rs. 71,54,956/-being profits estimated at the rate of 8% of the estimated unaccounted turnover; (ii) Rs. 78,93,431/- being estimated unrecorded expenditure and (iii) Rs. 3,69,516/-being profit estimated at the rate of 8% on the difference in stock as per books vis-à-vis physical verification. 3. The assessee being aggrieved by the said order has preferred an appeal before your honor challenging the legality as well as the facts on the basis of which the aforestated additions have been made. The assessee has dealt with the aforementioned additions on grounds as under: * Grounds of Appeal a. That the Order passed under sec 143(3) of the I.T. Act, 1961 by the Ld. A.O. is unjustified and bad in law. b. That the Ld. A.O. erred in making addition of Rs. 71,41,345/- at the hands of the assessee on account of dumb documents found in the premises. C. That the Ld. A.O. erred in making an addition of Rs. 78,93,431/- on account of unexplained expenditure of coupons found, as the said coupons do not impact the determination of income of the assessee because they are r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of Man Mohan Sadani vs CIT (2008) 304 ITR 0052 at para 7, wherein it was held/concluded as under "...net profit rate has to be applied..." ii. Hon'ble Guwahati ITAT in the case of Sayqul Islam vs ITO (ITAT Guwahati) (ITA No 235/GTY/2019) at para 13, wherein it was held/concluded as under "Normally, to estimate the profit of any assessee, the previous years' profit ratios are used and not the subsequent years' profit ratio. However, the subsequent years' profit ratios as submitted by the assessee provide us a bird eye and rough idea that what is the earning trend in the assessee's business." iii. Hon'ble ITAT Cuttak in the case of Bhambra Service centre vs ITO 2018 53 CCH 414 at para 36, wherein it was held/concluded as under ".....the Assessing Officer cannot make a wild guess but has to estimate the income of the assessee on the basis of past accepted results...." iv. Hon'ble ITAT Agra in the case of DCIT vs Vankhandeshwar construction Co., (2017) 50 CCH 0209 (ITAT Agra) 279/Agra/2014 at para 7 & 8, wherein it was held/concluded as under ".....net profit was to be estimated by applying rate of profit in accordance with rates, applied in cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stimated unexplained expenditure made by AO u/ s 69C of the IT Act, 1961. I have considered the submission of the appellant I am of the view that one has been estimated by the AO rejecting the books of accounts the source of expenditure relating to such turnover on which income have been offer stands explain. The addition made on account of coupons why treating the same as unexplained expenditure tantamount to double additions of the same amount and accordingly the addition of Rs. 78,93,431/- is hereby deleted. Accordingly, the said ground is allowed. Further in ground no. 4 the appellant has raised the contention of addition of Rs. 3, 69,516 / - on account of difference in stock physically found in the premises and that recorded in the books. I am of the view that since the AO has extrapolated the sales on the basis of seized material and estimated the NP the above addition is unjustified and hence it is deleted. Further the appellant has offered additional income of Rs. 1,00,00,000/- in respect of A.Ys. 2018-19, 2019-20 & 2020-21 and 93,00,000/- for A.Y. 2020-21, 2019-20 and 2014-15 has been offered in case of Shri Ajay Kamnani. Hence considering the above facts, the appeals ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r passed. 12. On the other hand, the learned A.R. invited our attention that once the Assessing Officer has rejected books of accounts and estimated profits on turnover, the same shall take care of the expenses incurred for earning such profits and any addition made with respect to such expenses would tantamount to double addition. He relied upon the order dated 10/03/2021, passed by the Co-ordinate Bench of the Tribunal, Chennai Bench, in ACIT v/s S. Moorthy, ITA no.3091/CHNY/2019 (wherein the Hon'ble J.M. is a part of Corum). The relevant operative portion of the decision of the Tribunal is reproduced below:- "8. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. It is an admitted fact that the AO has rejected books of account u/s. 145(3) of the Act and estimated profit from the business by adopting 12.5% net profit on gross receipts. It is also an admitted fact that once books of account are rejected u/s. 145(3) of the Act, no further additions can be made by relying upon same books of account either in respect of cash credits u/s. 68 of the Act or unexplained commission expenses u/s. 69C of the Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash credit u/s. 68 of the Act and unexplained commission u/s. 69C of the Act, when the books of account were rejected u/s. 145(3) of the Act." 13. We have given a thoughtful consideration to the arguments made by the learned Departmental Representative and perused the material available on record. While going through the order passed by the Assessing Officer, we find that Assessing Officer has rejected the books of account and estimated profit on sales from the business. At the rate of 8% of the turnover, the learned CIT(A) deleted the addition stating the reason that once the books of accounts are rejected and the profit percentage has been estimated, no separate addition can be made towards unexplained expenditure under section 69C of the Act. Further, it is manifest that such expenditure has been estimated by a nebulous mathematical calculation as below, culled out from Para-10.2 of the assessment order. The submission furnished by the assessee has been carefully perused and considered. However, the same is not completely acceptable. It cannot be ruled out that the cash coupons are exchanged by the retailers/ customers with the goods sold by the assessee and business concerns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ught to the notice of the Bench that the said additional income has been declared under the head "Business and Profession", considering the discrepancies, unreconciled transactions, errors, and omissions involuntarily occurring in writing books of accounts, to avoid protracted litigation and buy peace of mind. The same has been duly reflected in the return of income under the head "Business and Profession" and taxes thereon have been duly paid at the time of filing return of income. 18. We have heard the rival arguments, perused the material available on record and gone through the orders of the authorities below. We find that the Learned CIT(A) has recorded that the appellant has offered Rs. 75 lakh, as additional income, which duly covers the profit @ 4% on the total turnover. Thus, we find that the Learned CIT(A) has correctly considered the additional income and our interference is not called for. 19. The ground no.6, is concerned, the addition of Rs. 3,69,516, on account of profit estimated @ 8% on the difference in the stock physically found vis-à-vis as appearing in books of accounts. 20. The learned Departmental Representative heavily relied on the assessment orde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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