2018 (5) TMI 1094 - HC - Income Tax

Estimation of additional income at the rate of 25% of the unaccounted sales - Held that - Assessee s offer was 20% of the unaccounted sales be treated as the assessee s additional income. The Appellate Commissioner examined this offer in proper prospective and estimated the assessee s additional income at the rate of 25% of the unaccounted sales as against 30% assessed by the Assessing Officer. Thus, the Commissioner committed no error at all. In fact, the Tribunal also examined the entire issue and concurred with the view of the Commissioner (Appeals) by giving reasons. When the Tribunal has confirmed the view of the Commissioner of Income Tax (Appeals), this by itself should not create any difficulty for the assessee

Summary

Issues:
1. Assessment of additional income based on unaccounted sales.
2. Discrepancy in the percentage of additional income assessed by different authorities.

Analysis:

Issue 1: Assessment of additional income based on unaccounted sales
The case involved appeals arising from an order of the Income Tax Appellate Tribunal regarding the assessment of additional income for an assessee who was found to be involved in unaccounted income. The Assessing Officer initially assessed the additional income at a rate of 30% of the unaccounted sales, while the Commissioner (Appeals) later agreed to a computation of 20% of such sales. The Tribunal ultimately adopted a rate of 25% of the net profit from the unaccounted sales to be brought to tax. The High Court observed that the Commissioner's decision to estimate the additional income at 25% was justified, and the Tribunal's confirmation of this decision was found to be in line with proper examination of the issue.

Issue 2: Discrepancy in the percentage of additional income assessed
The Tribunal, in its order, noted that the assessee had offered income at a rate of 20% of the gross profit, leading to the justification of estimating the income at 25% of the gross profit rate by the Commissioner. However, the High Court clarified that the correct assessment should be based on 25% of the unaccounted sales, not the gross profit. The High Court emphasized that the Tribunal's reference to gross profit was an error and should be ignored, as the essence of the decision was to confirm the Commissioner's limit of additional income at 25% of the unaccounted sales. Consequently, all tax appeals were disposed of in light of this clarification.

In conclusion, the High Court upheld the assessment of additional income at 25% of the unaccounted sales, dismissing any discrepancies in the percentage assessed by different authorities and emphasizing the importance of proper examination and clarification in tax assessment matters.