9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2013 (2) TMI 478 - AT - Income TaxEstimation of GP - search & seizure u/s 132 of the Act were conducted - several incriminating documents were seized - notice u/s 158BD of the Act were issued on 24.11.1999 to file return for the block period commencing from 1.4.1988 to 8.1.1999 - Assessee filed a return on 11.12.2000 declaring undisclosed income of Rs.7.50 lacs AO found unaccounted sales of bricks Section 145 were invoked - On examination of the seized documents in respect of financial year falling under this block period, undisclosed income of Rs.70,13,557/- was determined by the AO. - AO adopted GP rate at 23% for the purpose of computing undisclosed income Held that - there is a specific provision u/s 158BC , which confers jurisdiction on the AO to invoke the provisions of Section 145 as also Section 144 of the Act. Thus, AO is competent to make estimate based on the incriminating documents. AO has extensively placed reliance on the seized documents and determined the sales of bricks outside the required books of account, which were admitted by the assessee for the financial year 1993-94, 1994-95, 1995-96 and 1998-99. AO worked out sale of bricks for the financial year 1996-97 at Rs.61,68,819/- whereas the assessee worked sales of bricks at Rs.59.63 lacs. Similarly, for the financial year 1997-98, the AO worked out the sales at Rs.64,26,735/- whereas the assessee worked out the sale of bricks at Rs.61,68,819/- Therefore, in these two financial years, viz 1996-97 and 1997-98, there is insignificant difference between the estimation made by the AO and the assessee. Having regard to the fact situation of the present case and the analysis of incriminating seized documents and case laws relied upon by the assessee,it is fair and reasonable to apply net profit rate at 7.85% - The AO is directed to apply NP at 7.85% for the purpose of computation of undisclosed income of block period Appeal of the assessee is allowed for statistical purposes only.
Issues Involved:
1. Opportunity denied to the assessee regarding the computation of final undisclosed income. 2. Estimate of sales for each assessment year within the block period. 3. Estimate of Gross Profit (GP) rate at 23%. 4. Disallowance of expenses of Profit & Loss Account nature. Issue-wise Detailed Analysis: 1. Opportunity Denied to the Assessee: - Ground No. 1(a): The assessee raised an objection that the Assessing Officer (AO) denied them the opportunity to contest the computation of final undisclosed income. However, this ground was not pressed by the assessee's representative and was dismissed as not pressed. 2. Estimate of Sales for Each Assessment Year within the Block Period: - Ground No. 1(b): The assessee contended that the CIT(A) erred in upholding the estimate of sales for each assessment year within the block period without appreciating the assessee's submissions supported by seized documents and relevant case laws. - Findings: The AO conducted a search and seizure operation, which revealed unaccounted sales of bricks. The AO determined that the regular books of account were unreliable and invoked Section 145 of the Income-tax Act, 1961. The AO estimated the sales based on seized documents and determined an undisclosed income of Rs. 70,13,557/-. The CIT(A) upheld the AO's findings, stating that the provisions of Section 158BC(b) allow the AO to make estimates based on seized documents. - Conclusion: The Tribunal found that the AO was competent to make estimates based on incriminating documents and upheld the estimation of sales for the block period. 3. Estimate of Gross Profit (GP) Rate at 23%: - Ground No. 1(c): The assessee challenged the GP rate of 23% used by the AO, arguing that it ignored their submissions and comparable cases. - Findings: The AO adopted a GP rate of 23% for computing undisclosed income, arguing that expenses were already covered under the 'Expenses Head' of 77%. The assessee argued for the application of net profit (NP) instead of GP, citing various case laws. - Conclusion: The Tribunal, after considering the case laws and the specific facts of the case, deemed it fair to apply a net profit rate of 7.85% for determining the undisclosed income for the block period, rather than the GP rate of 23%. 4. Disallowance of Expenses of Profit & Loss Account Nature: - Ground No. 1(d): The assessee contended that the CIT(A) erred in upholding the disallowance of expenses that are normally incurred and some of which were payments to government and semi-government organizations. - Findings: The AO disallowed these expenses, arguing that they were already covered under the 77% expenses head. The Tribunal found that the AO's approach was not justified, especially in light of the case laws cited by the assessee. - Conclusion: The Tribunal directed the AO to apply a net profit rate of 7.85% for the purpose of computing undisclosed income, which inherently considers the expenses. General Ground: - Ground No. 2: This ground was general in nature and did not require separate adjudication. Final Judgment: - The appeal of the assessee was allowed for statistical purposes, with the direction to apply a net profit rate of 7.85% for the computation of undisclosed income for the block period. The decision was based on the special facts of the present case and was not intended to serve as a general precedent.
|
