2015 (11) TMI 1750 - AT - Income Tax

Unexplained expenditure in respect of undisclosed/suppressed sales - profit estimation - CIT-A proceeded to estimate the assessee s profit @18% of the turnover after recording that entities in the same line of business - Held that - Merely because the expenditure incurred by the assessee in respect of this turnover has not been proved does not mean that there was no expenditure incurred at all and such a plea cannot be accepted. In such circumstances an estimate of the probable profit has to be made having regard to the surrounding circumstances ground realities corroborative evidence in the form of profits shown in comparative cases and other factors that are relevant to determine the real income of the assessee. CIT(A) has followed the correct and reasonable approach in estimating the profit on the suppressed turnover worked out by the AO which has not been questioned by the assessee. Revenue except for raising the ground has not been able to contravene the finding of the learned CIT(A) and we are, therefore no interference is called for in the finding of the learned CIT(A) in the impugned order on this issue. - Decided against revenue

Summary

Issues:
1. Assessment of income based on poultry farming turnover.
2. Dispute over computation of income by applying gross profit on suppressed sales.
3. Appeal against CIT(A) order for assessment year 2011-12.

Issue 1: Assessment of income based on poultry farming turnover:
The appellant, a firm engaged in poultry farming, filed its income tax return for the assessment year 2011-12, declaring a total income of Rs. 34,140. Following a survey conducted under section 133A of the Income Tax Act at the business premises, the Assessing Officer (AO) computed the turnover from sale of eggs at Rs. 1,80,38,064, based on certain assumptions, while the appellant had disclosed a lower turnover in the profit & loss account. The AO completed the assessment, determining the income at Rs. 54,55,490, considering the difference in turnover as taxable income. The appellant, aggrieved by this order, appealed to the CIT(A), who partially allowed relief to the appellant by directing the AO to re-compute income by applying a gross profit rate on the suppressed sales turnover.

Issue 2: Dispute over computation of income by applying gross profit on suppressed sales:
The Revenue appealed against the CIT(A) order, specifically challenging the direction to re-compute income by applying an 18% gross profit rate on the suppressed sales turnover. The Revenue contended that the appellant did not provide evidence of expenses related to the suppressed production of eggs. The Appellate Tribunal carefully considered the arguments of both parties and analyzed the facts and case laws presented. The Tribunal observed that the entire amount of sales does not represent the income of the assessee, and only the realization over cost can be considered as profit. Relying on various judgments, the Tribunal upheld the CIT(A)'s decision to estimate the profit at 18% of the turnover, considering the surrounding circumstances and corroborative evidence from comparable cases in the same business line. The Tribunal dismissed the Revenue's appeal, emphasizing that the CIT(A) had taken a correct and reasonable approach in estimating the profit on the suppressed turnover.

Issue 3: Appeal against CIT(A) order for assessment year 2011-12:
The Appellate Tribunal, after a detailed analysis of the facts and legal precedents, pronounced the order dismissing the Revenue's appeal for the assessment year 2011-12. The Tribunal affirmed the CIT(A)'s decision to re-compute income by applying a gross profit rate on the suppressed sales turnover, highlighting the necessity to estimate profit based on the circumstances and comparative cases in the industry. The Tribunal found no grounds to interfere with the CIT(A)'s finding and upheld the decision in favor of the appellant.

This detailed analysis of the legal judgment from the Appellate Tribunal ITAT BANGALORE for the assessment year 2011-12 provides a comprehensive overview of the issues involved, the arguments presented, and the final decision rendered by the Tribunal.