2014 (7) TMI 1106 - AT - Income Tax

Suppression of turnover - Non production of evidence of incurring expenditure - CIT(A) determined the total income at 15% of the additional turnover - Held that - There is no need to disturb the order of the Ld. CIT(A). A.O. could have given an opportunity to the assessee to reconcile the turnover or examined how the excess turnover could be reported. Atleast he could have verified from the company viz., JCB India Limited about the purchases made by the assessee as assessee being a company, could have maintained books of accounts under the Company Law. However, A.O. has added so-called difference of turnover as reported by the CIB, even without verifying from the sales tax department and made the addition of difference of turnover as income - there is no need to interfere with the order of the Ld. CIT(A) as the entire turnover can not be taken as income of the assessee. Judicial principles on the issue support only estimation of income on the so-called additional turnover. In view of this, we do not find any merit in the Revenue grounds - Decided against Revenue.

Summary

Issues:
Estimation of income on additional turnover of Rs. 142.99 crores.

Analysis:
The appeal by Revenue challenged the Order of the CIT(A)-III, Hyderabad regarding the estimation of income on the additional turnover. The Revenue contended that the CIT(A) erred in treating 15% of the suppressed turnover as income without evidence of corresponding expenditure. The assessee company derived income from the purchase and sale of machineries and spare parts. The AO completed the assessment ex-parte under section 144 due to the assessee not responding to notices, resulting in certain additions, including an additional turnover of Rs. 142.99 crores. The CIT(A) determined the total income at 15% of the additional turnover, confirming an addition of Rs. 21.44 crores.

Before the CIT(A), the assessee argued against treating the entire turnover as income, emphasizing the need for deductions related to the cost of goods and incidental expenses. The CIT(A) acknowledged the nature of the business and the need for allowances for purchases and expenses, hence determining the income at 15% of the additional turnover. The Tribunal noted that the AO could have allowed the assessee to reconcile the turnover or verify purchases from JCB India Limited. The Tribunal observed that the entire turnover could not be considered as income, supporting only the estimation of income on the additional turnover.

Despite the Revenue's contentions, the Tribunal upheld the CIT(A)'s order, emphasizing the need for proper estimation of income on the additional turnover. The Tribunal highlighted the importance of considering the business realities and allowing for necessary deductions before determining the income. Ultimately, the appeal of the Revenue was dismissed, affirming the CIT(A)'s decision on the estimation of income on the additional turnover.

In conclusion, the Tribunal's decision focused on the proper estimation of income on the additional turnover, considering the nature of the business and the need for deductions related to purchases and expenses. The Tribunal rejected the Revenue's appeal, supporting the CIT(A)'s determination of income at 15% of the additional turnover, highlighting the importance of judicial principles in such matters.