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2020 (12) TMI 94 - AT - Income TaxRecasting the income of the assessee - NP determination - Whether import purchase amount shown by the Ld. CIT(A) in the recast is erroneous? - HELD THAT - As purchase amount as evident from books and other records is ₹ 16,20,796/-. We note that the Ld. CIT(A) has accepted this figure of import-purchase after taking note that assessee imported the goods against LC and the entire transaction took place through banking channel as well as there were bills of entry and invoices, so when the Ld. CIT(A) has accepted the purchase of goods on import as ₹ 16,20,796/-, the Ld. CIT(A) erred while recasting to adopt the figure of ₹ 14,60,834/- when the actual purchase price of goods on import was ₹ 16,20,796/-, so there is a difference of ₹ 1,69,962/- ₹ 16,20,796/- - ₹ 14,60,834 . We note that the N.P % shown by the assessee for export of fish dust after recast of export sale account is 21.5% which is reasonable and moreover considering the fact that the action of Ld. CIT(A) will result in N.P of 46%, which will be high and unreasonable. We direct the AO to accept the re-casted export sale account of assessee, wherein the assessee has shown N.P of 21.5% i.e. ₹ 6,70,968/- and accordingly compute the tax. Appeal of assessee is allowed.
Issues:
1. Justification of modification and enhancement of returned income by Ld. CIT(A) 2. Disallowance of transportation charges and damage claim by Ld. CIT(A) 3. Derivation of 40% profit on alleged undisclosed export sales by Ld. CIT(A) Issue 1: The Appellant challenged the Ld. CIT(A)'s modification and enhancement of the returned income, arguing that the Ld. CIT(A) was unjustified in sustaining an addition of ?14,40,340 against export sales to Bangladesh. The AO noted discrepancies in the sales turnover reported in the audit report and income tax return, leading to the addition of undisclosed turnover as income. The Ld. CIT(A) allowed the appeal in part, deleting the addition of ?84,17,622, stating that the receipt from transportation activity was erroneously categorized. The Ld. CIT(A) directed the AO to rectify this error. Issue 2: Regarding the disallowance of transportation charges and damage claim by the Ld. CIT(A), it was found that the Appellant had accepted the mistake made by the Accountant in overlooking a purchase transaction. The Ld. CIT(A) accepted the import purchase price of ?16,20,796, supported by proper documentation. However, the Ld. CIT(A) required clarification on the source of these purchases. The Appellant claimed to have made export sales of ?31,21,380, which had not been disclosed earlier. The Ld. CIT(A) re-casted the income from undisclosed sources, disallowing certain expenses and concluding an additional undisclosed income of ?14,44,340. Issue 3: In the appeal, the Appellant contested the Ld. CIT(A)'s recasting of the income, arguing that the import purchase amount was erroneously stated as ?14,60,834 instead of the actual ?16,20,796. The Ld. CIT(A) was criticized for adopting an incorrect figure, leading to a difference of ?1,69,962. The Appellant maintained that the N.P % shown for export sales was reasonable at 21.5%, while the Ld. CIT(A)'s approach resulted in an unrealistic 46% NP. Consequently, the Tribunal directed the AO to accept the re-casted export sale account, acknowledging a N.P of 21.5% at ?6,70,968. In conclusion, the ITAT Kolkata allowed the appeal of the assessee, directing the AO to compute the tax based on the re-casted export sale account showing a net profit of ?6,70,968 at 21.5%. The judgment highlighted discrepancies in reported turnover, import purchases, and undisclosed income, emphasizing the importance of proper documentation and accurate financial reporting in tax assessments.
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