2022 (8) TMI 1369 - AT - Income Tax

Unaccounted job receipts - addition of 20% - CIT Restricted addition being profit @ 5% - AO was of the view that on comparison of the parties which are common in the books and data recovered from the computer back up the job work done is very higher than job work reflected in the books of account - HELD THAT - It is settled law under the income tax proceeding that only income component is to be taxed and not the substantial part of the transaction. Considering the fact that the ld CIT(A) has already granted substantial relief to the assessee and directed to tax only to the extent of 5% of Rs. 2.589 Crore. In our view the ld CIT(A) has already granted substantial relief to the assessee which we affirm. Hence no merit in further reducing the addition which has already been reduced substantially by the ld. CIT(A). No justifiable reason to given further relief to the assessee. Appeal of assessee is dismissed.

Issues Involved:
1. Addition of Rs. 12,94,933/- as profit from alleged unaccounted job receipts.
2. Legitimacy of data retrieved from Purchi software.
3. Method of calculating profit from unaccounted job work.
4. Consistency in handling similar grounds of appeal for different assessment years.

Detailed Analysis:

1. Addition of Rs. 12,94,933/- as profit from alleged unaccounted job receipts:
The assessee challenged the addition of Rs. 12,94,933/- made by the Assessing Officer (AO) and confirmed by the CIT(A) as profit from unaccounted job receipts. The AO identified discrepancies between job work receipts in the assessee's books and data retrieved from Purchi software, leading to the addition. The AO disallowed 20% of the unaccounted job work receipts, treating it as profit, which was later reduced to 5% by the CIT(A).

2. Legitimacy of data retrieved from Purchi software:
The AO found differences between the job work receipts recorded in the books and those in the Purchi software, which the assessee claimed was used for internal reprocessing records. The AO rejected the assessee's explanation, noting that the data from Purchi software indicated higher job work receipts than those recorded in the books. The CIT(A) upheld this view, stating that the data from Purchi software was unaccounted for and supported the AO's findings with documentary evidence.

3. Method of calculating profit from unaccounted job work:
The AO initially added 20% of the unaccounted job work receipts as profit. The CIT(A) revised this, considering the average net profit ratio of 1.82% over six years and reduced the addition to 5% of the total unaccounted job work receipts. The CIT(A) referenced case laws supporting the taxation of only the profit element embedded in the unaccounted receipts, not the entire amount.

4. Consistency in handling similar grounds of appeal for different assessment years:
The appeals for the assessment years 2014-15 and 2015-16 raised similar grounds as the appeal for 2013-14. The Tribunal dismissed these appeals, maintaining consistency with the decision for the 2013-14 assessment year. The Tribunal affirmed the CIT(A)'s decision to restrict the addition to 5% of the unaccounted job work receipts, granting substantial relief to the assessee.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to restrict the addition to 5% of the unaccounted job work receipts, affirming that only the profit element should be taxed. The appeals for the subsequent assessment years were dismissed in line with the decision for the 2013-14 assessment year, ensuring consistency in the Tribunal's approach.

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