2015 (3) TMI 1401 - AT - Income Tax

Excess cash as generated from unaccounted sales - No explanation to difference in cash either during the survey proceeding or in course of assessment proceeding - HELD THAT - There is no dispute to the fact that on physical verification excess cash was found at the time of survey. AO has treated excess cash as unexplained income of assessee by alleging assessee failed to explain the source of excess cash. However, it is the contention of assessee before ld. CIT(A) as well as before us that excess cash found at the time of survey belong to partners of HUF. On perusal of the returns filed electronically by Giridharlal Sons, HUF for the AYs. 2008-09 and 2009-10, it appears that not only the returns were filed prior o the date of survey, but, the HUF is also generating some amount of income. The balance sheet as on 31/03/08 also shows cash in hand of ₹ 70,000. Therefore, assessee s claim that excess cash actually belong to HUF cannot be out rightly rejected. In the aforesaid view of the matter, considering the fact that assessee s explanation with regard to excess cash is plausible, the addition made cannot be sustained. Accordingly, we delete the same. Estimate gross profit on the alleged suppression of sale - HELD THAT - No material has been brought to our notice by ld. DR to even remotely indicate assessee has indulged in suppression of sale. Drop in sales for the post survey period may be due to various reasons but without bringing any material on record to suggest suppression of sales, merely on assumptions and presumptions sales cannot be estimated by alleging suppression of sales by assessee. More so, when it is a fact on record that assessee regularly files its VAT returns disclosing sales turnover, which is in accordance with the books of account and authorities under the VAT Act have not pointed out any sales suppression. At least nothing of the sort has been brought to our notice. As regards the decision of RAJNIK AND CO. 2001 (4) TMI 53 - ANDHRA PRADESH HIGH COURT on careful examination of the same, we are of the view that it is not applicable to the facts of the present case as in the case decided by the Hon ble High Court there were evidences on record to show that assessee has suppressed sales. Whereas, in the present case there is not even a single piece of evidence to show that assessee has suppressed its sales. In view of the aforesaid, we hold that addition made by estimating sales is not proper, hence, cannot be sustained. Accordingly, we delete the same.

Summary

Issues:
1. Addition of excess cash found during survey to the income of the assessee.
2. Estimation of gross profit on alleged suppression of sales.

Issue 1: Addition of Excess Cash:
The appeal challenged the addition of Rs. 77,128 to the income of the assessee, representing excess cash found during a survey. The Assessing Officer (AO) added this amount as unexplained income, as the assessee failed to provide a satisfactory explanation for the difference in cash balances. The assessee contended that the excess cash belonged to the Hindu Undivided Family (HUF) of the partners, supported by the HUF's income tax returns for the relevant assessment years. The Income Tax Appellate Tribunal (ITAT) noted that the returns filed by the HUF showed income and cash balances, indicating a plausible connection to the excess cash found during the survey. Consequently, the ITAT held that the addition made by the AO was not sustainable and deleted the same.

Issue 2: Estimation of Gross Profit on Suppressed Sales:
The second aspect of the appeal involved the estimation of gross profit on alleged suppression of sales amounting to Rs. 33 lakhs. The AO based this estimation on the difference in sales figures before and after the survey, assuming manipulation by the assessee. However, the assessee argued that there was no concrete evidence of sales suppression, as reflected in regular VAT returns and consistent sales figures in previous financial years. The ITAT emphasized that the mere decrease in sales post-survey could not be a sufficient basis for estimating sales, especially without any material evidence of suppression. The tribunal rejected the AO's estimation, highlighting the lack of evidence to support the claim of sales manipulation. Consequently, the ITAT allowed the appeal, directing the AO to calculate the gross profit and make additions based on that percentage on the excess sales, providing relief to the assessee.

In conclusion, the ITAT Hyderabad, comprising Shri B. Ramakotaiah and Shri Saktijit Dey, allowed the appeal by the assessee, overturning the additions made by the AO related to excess cash and estimated sales. The tribunal emphasized the importance of concrete evidence in tax assessments and rejected estimations based on assumptions or suspicions without factual support.