2018 (7) TMI 1817 - HC - Income Tax

Sales suppression detected on survey - Whether could be taken as taxable income when there was no suppression found on purchases? - Held that - This is the additional income received as profit on sales, over and above that seen from the accounts. We need not labour on the figures in the next year; which alone differ and the principle on which estimation was made is similar. The mere fact that there was no investment made outside the books of accounts would not help the assessee in the present case. As was noticed, the purchase turnover does not alter at all since the purchases can only be made from a State owned Corporation. There is no restriction with respect to the price for which liquor has to be sold by a person holding licence to run Bars under the Abkari Act. The price being variable and the suppression being the actual price for which the liquor was sold; the entire suppression is income. The assessee having filed its return claiming deduction for the entire expenditure incurred, there is no warrant for making further deduction for expenditure or computing the profit for the suppressed sales turnover detected on survey. What was detected on survey was added on as income and the assessment was completed, which cannot be faulted. - Decided against assessee.

Summary

Issues Involved:
- Whether sales suppression without purchase suppression can be considered as taxable income?

Analysis:
The case involved the assessment of a Bar attached hotel where a survey revealed sales suppression without any evidence of purchase suppression. The tax authorities determined turnover suppression based on the excess sales of Indian Made Foreign Liquor (IMFL) found during the survey. The First Appellate Authority and the Tribunal referred to a Gujarat High Court decision to argue that without purchase suppression, income suppression from sales could not be alleged. However, the High Court noted that the Gujarat case dealt with manufactured goods, while the present case involved liquor sales through a Bar Hotel, where purchases were exclusively made from a State-owned Corporation.

The survey findings indicated discrepancies in sales figures, with sales at a much higher price than recorded in the accounts. The tax authorities estimated the additional income from the suppressed sales turnover and added it to the taxable income. The Court emphasized that since the purchases were from a State Corporation and accounted for, the entire sales suppression could be considered as income. The Court rejected the argument that the entire expenditure should be deducted, as the suppressed sales turnover was added as income in the assessment without further deductions.

In conclusion, the Court ruled in favor of the Revenue, allowing the appeals, setting aside the orders of the appellate authorities, and reinstating the Assessing Officer's decision. The parties were directed to bear their respective costs.