2012 (9) TMI 229 - AT - Income Tax

Survey - books impounded reveal indulging of assessee in unaccounted sale and purchase outside the books of account - addition made for unexplained investment in business outside the books - addition on account of gross profit worked out on sales not recorded in books of a/c - addition of extra profit on turnover recorded in regular books of accounts - Held that - it is found that at the time of survey the assessee himself admitted additional income of Rs.14,00,000/- and while filing return of income the assessee has surrendered only Rs.11,50,000/-. There are no convincing reasons for reducing the declaration made at the time of survey. We find whatever the items of additions which are estimated by the A.O. are covered by disclosure made at the time of survey for Rs.14,00,000/-. We, therefore, find that it will be fair and justice to both sides and to cover all lapses and deficiency which have been pointed by Revenue authorities if addition to the extent of Rs.2,50,000/- is sustained out of the total addition of Rs.23,40,650/- made by the A.O. We accordingly sustain addition to the extent of Rs.2,50,000/- and balance amount of addition is deleted - Decided partly in favor of assessee

Summary

Issues:
- Unexplained investment in business outside the books
- Amount of extra profit on turnover recorded in regular books of accounts
- Excessive additions made by authorities
- Legality of Assessment Order under section 143(3)

Analysis:
1. Unexplained Investment in Business Outside the Books:
- During a survey, unaccounted sale and purchase outside the books of account were discovered.
- The Assessing Officer (A.O.) found unexplained investment for sales outside the books.
- A.O. calculated unexplained investment and additional profit based on Gross Profit (G.P.) rates.
- The A.O. applied a G.P. rate of 21.14% on declared turnover, leading to additional income determination.
- The CIT(A) sustained the addition of Rs.3,14,250 for unexplained investment, reducing it from the initial Rs.10,66,764 by the A.O.

2. Amount of Extra Profit on Turnover Recorded in Regular Books of Accounts:
- A.O. calculated extra profit based on discrepancies in sale and purchase amounts.
- The A.O. applied a higher G.P. rate of 22.14% on the turnover declared by the assessee.
- The CIT(A) confirmed an addition of Rs.11,58,795 for extra profit, reducing it from Rs.12,65,391 by the A.O.
- CIT(A) considered the A.O.'s addition as a double addition and restricted it to Rs.1,15,391.

3. Excessive Additions Made by Authorities:
- The A.O. made multiple additions based on the same set of facts, resulting in a net addition of Rs.23,40,650.
- The CIT(A) partly confirmed the A.O.'s actions but allowed benefits of surrendered and peak amounts.
- The Tribunal found that some of the A.O.'s additions were correct, while others were not justified.
- The Tribunal sustained an addition of Rs.2,50,000 out of the total Rs.23,40,650 made by the A.O., balancing fairness and justice.

4. Legality of Assessment Order under Section 143(3):
- The appellant challenged the legality of the Assessment Order under section 143(3).
- The Tribunal found discrepancies in the assessment process and reduced the total addition made by the A.O.
- The Tribunal partly allowed the appeal, sustaining an addition of Rs.2,50,000 and deleting the balance amount.

In conclusion, the Tribunal partially upheld the additions made by the authorities, considering the disclosures made during the survey and the fairness to both sides. The judgment highlighted the importance of justifying additions based on material evidence and ensuring a balanced approach in tax assessments.