9911796707
TMI Blog2024 (12) TMI 1332X X X X Extracts X X X X X X X X Extracts X X X X ..... rdingly, the delay is condoned and the appeals are admitted for adjudication. First, we take up ITA No. 1006/Kol/2024. 3. Ground no. 1 of the revenue is against the deleting the addition of Rs. 4,94,43,275/- in respect of undisclosed sales by the assessee without appreciating the materials brought on record and facts evaluated by the AO in the assessment order. 4. Facts in brief are that the assessee filed his return of income on 28.10.2019 declaring total income of Rs. 1,82,15,400/-. A search action u/s. 132 of the Act was conducted in the case of Rajesh Jain & Ors on 02.04.2019 during which several incriminating documents were found and seized. The Rajesh Jain Group is engaged in the business of trading of readymade garments, fabrics and other related activities. Accordingly, notice u/s. 153A of the Act was issued on 27.02.2021 which was duly served on the assessee and the assessee complied with the said notice by filing return of income in compliance on 30.03.201 declaring income of Rs. 1,82,15,400/-. Thereafter, statutory notices were duly issued and served on the assessee along with the questionnaire. The AO, during the course of assessment proceeding noted from the seized d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,624/- as additional income. Further, in response to notices u/s 142(1) of the Act, the assessee explained how he had arrived to his additional income i.e., the net profit on the undisclosed sales of Rs. 5,08,35,899/-. It is observed that during the assessment proceedings the assessee had claimed purchase of RsA,94,43,275/- against the said undisclosed income. Additionally, it is also observed from the assessment record that to substantiate his claim of the said purchase, he submitted all the relevant bills and vouchers to the AO during the assessment proceedings. However, during the assessment proceedings, the AO could not consider the said submissions of the assessee and made addition of total undisclosed sale of Rs. 5,08,35,899/- to the income of the assessee. 5.2.2. It is noteworthy to mention that it is a settled law that for the purposes of computing the total income under the Act deduction shall be allowed in respect of expenditure incurred by any person in relation to the income which form part of the total income under the Act. It is a common knowledge that in case of any sales incurred, only profit therefrom could only be taxed as income of that person. The same is app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s return of income as prescribed by law, even if as a consequence of search carried out under section 132 and in consequence of notice issued under section 153A, the assessee is obviously entitled for claiming corresponding deductions provided in law. The deduction claimed in a return filed under section 153A cannot be denied on the ground that the claim was not made earlier in a return filed under section 139(1). In the present case, the returns were filed because of section 132, section 153A and consequently because of section 139. Income of the assessees had to be declared because of the event of search. At that time the assessees were equally entitled to claim lawful deductions available to them. A claim made by an assessee cannot be denied only on the ground that the return was filed in consequence of search." d) The Hon'ble Bombay High Court, in the case of 'CIT v. B. G. Shirke Construction Technology (P.) Limited [2017] 79 taxmann.com 306' had held the following: "Consequent to notice under Section 153A of the Act the earlier return filed for the purpose of assessment which is pending, would be treated as non est in law. Further, Section 153A(1) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d judgement his not held that the entire sale proceeds have to be should be regarded as profit or treated as undisclosed income of the assessee. On the contrary, this Court has categorically held that it is the net profit rate which has to be adopted in such cases." 5.2.4. In view of the aforesaid judicial pronouncements as well as the discussion held above, it can be inferred that total receipt of unaccounted sale proceeds cannot be considered as unaccounted income of the assessee. Relevant purchases and other expenses related to the said unaccounted sale should also be taken in account while determining unaccounted income of the assessee for unaccounted sale. The purchases and other expenses as declared by the assessee should be considered for arriving at unaccounted income of the assessee. Hence, the AO is directed to allow the expenses claimed by the assessee for such unaccounted sale. The assessee has accepted Rs. 13,92,624/- as his income against the undisclosed sale which has already incorporated by the assessee in his Return of Income filed u/s 153A of the Act for the subjected AY 2019-20. Therefore, the addition of Rs. 4,94,43,275/- is to be deleted. Hence, these grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to be made for the purchases and other expenses incurred by the assessee for arriving at the unrecorded income. Accordingly, the Ld. CIT(A) directed the AO to delete the addition of Rs. 4,94,43,275/- as the AO himself accepted the profit of Rs. 13,92,624/- as income against the said unrecorded sales. The AR of the assessee cited before us the following decisions which squarely covers the assessee's case: i. CIT vs. President Industries (124 taxmann.com 654) [Gujrat HC] ii. PCIT vs. Anumpam Organiser (Appeal No. 168 of 2020) [Gujrat HC] iii. CIT vs. Ajay Kapoor (36 taxmann.com 513) [Delhi HC] iv. CIT vs. Leo Formulations (P.) Ltd (48 taxmann.com 328) [Gujrat HC] v. V.R. Textile vs. JCIT (ITA 949/ AHD/2007) [ITAT Ahmedabad] vi. Jyotichand Bhaichand Saraf & Sons (P.) Ltd vs. DCIT (Appeal No. 08(PN) of 2011) [ITAT Pune] vii. MGV Jain Jewellers (P.) Ltd vs. ITO (Appeal No. 2896 of 2017) [ITAT Delhi] 7.1. In the case President Industries (supra), the Hon'ble Gujarat High Court has held as under: "The amount of sales by itself cannot represent the income of the assessee who has not disclosed the sales. The sales only represent the price received by the seller of the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... detection of on money receipt or unaccounted cash receipt, what can be brought to tax is the profit embedded in such receipts and not the entire receipts themselves. If that be the legal position, what should be estimated as a reasonable profit out of such receipts, must bear an element of estimation. 16. In view of the legal position that not the entire receipts, but the profit element embedded in such receipts can be brought to tax, in our view, no interference is called for in the decision of the Tribunal accepting such element of profit at Rs. 26 lakhs out of total undisclosed receipt of Rs. 62 lakhs. In other words, we accept the legal proposition, the Tribunal accepting Rs. 26 lakhs disclosed by the assessee as profit out of total undisclosed receipt of Rs. 62 lakhs, would not give rise to any question of law." 7.3. In the case of Ajay Kapoor, the Hon'ble Delhi High Court has held as under: "On reading the reasoning given by the Tribunal, it need not be interfered with on the ground that it is perverse. There may be some reservations, but the basic facts, form the core and foundation of the order. These include the GP rate of the assessee as recorded in the books of acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made, as there was other apparent evidence to the contrary is also not acceptable. Onus, in such cases, is on the assessee to show that unaccounted investment was made out of accounted stock. There cannot be any assumption or presumption that unaccounted sales must be from accounted purchases. Unaccounted sales may result and can contribute towards the investment, but there has to be initial investment. Profits and income earned are also used for personal needs and are taken out of business. [Para 11] * The Tribunal did not deal with the second issue in right perspective by placing the onus on the revenue to explain the source of investment made by the assessee though there were unaccounted sale transactions. It has ignored relevant and material facts and has gone on a tangent without examining the real issue and the controversy, i.e., whether the assessee explained the source of funds required for making investment to have such turnover as the unaccounted sales. Therefore, this part of the order is perverse and cannot be accepted. [Para 13]. The question is answered partly in favour of the appellant and against the respondent. (para 17)" 7.4. In the impugned appeal before us, ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
