2022 (4) TMI 482 - AT - Income Tax

Gross profit on deficit of stock - Disclosure made by the assessee during the survey operation - survey operation under section 133A on the premises of the assessee - As per the assessee such disclosure was made to cover up the transactions of unaccounted sales, deficit of stock and other cash transactions. Accordingly, it was contended that there cannot be any separate addition to the total income of the assessee representing the gross profit on the unaccounted sales - Primary onus to prove - HELD THAT - Assessee has not discharged its onus by producing the primary documents in support of its contention. The primary onus lies on the person who asserts the preposition and not on the person who denies. Moving further, AR at the time of hearing drew our attention on the letter dated NIL written by the director of the company to justify that the disclosure of ₹ 2 crores includes the transactions of the unaccounted sales.We have gone through the letter furnished by the director of the assessee company. In such letter, we note that there was the discussion and admission of the unaccounted sales. From the impugned letter, it is revealed that it starts with the words in addition to the above . These words suggest that the additions of ₹ 2 crores has been made by the assessee besides the disclosure of ₹ 33,50,310/- only. Moreover, we find that the assessee failed to provide the primary documents to appreciate whether the cash transactions is inclusive of unaccounted sales. Therefore, we are not inclined to concur with the arguments of the learned counsel for the assessee. Hence, in the given facts and circumstances, particularly in the absence of the primary documents, we are not inclined to interfere in the finding of the authorities below. Hence the ground of appeal of the assessee is hereby dismissed.

Summary

Issues Involved:
1. Addition of gross profit on deficit of stock.
2. Whether the disclosure of ?2 crores includes the gross profit on unaccounted sales.

Issue 1: Addition of Gross Profit on Deficit of Stock:

The appeal was filed by the Assessee against the order of the Commissioner of Income Tax (Appeals) upholding the addition of ?33,50,310 as gross profit on the deficit of stock. The Assessee contended that the alleged excess stock as per the books of account was either sold subsequently or part of the closing stock on 31st March, 2010. The Assessee argued that the books of accounts were regularly audited and maintained in conformity with Accounting Standards. The Assessee also cited a Tribunal decision to support their case. However, the Tribunal found that the addition on account of the deficit in stock was sustained by the Commissioner and deserved to be deleted. The Tribunal dismissed the appeal on this ground.

Issue 2: Disclosure of ?2 Crores Including Gross Profit on Unaccounted Sales:

The Assessee, a private limited company engaged in manufacturing, disclosed ?2 crores as income on behalf of its group to cover various transactions, including unaccounted sales and deficit of stock. The Assessing Officer disagreed with the Assessee's contention, stating that the disclosure of ?2 crores was independent of the gross profit agreed to be offered on unaccounted sales. The Commissioner of Income Tax (Appeals) also rejected the Assessee's argument, emphasizing that the gross profit amount was not retracted by the Assessee. The Commissioner observed that the disclosure of ?2 crores was distinct from the gross profit amount. The Tribunal noted that the Assessee failed to provide primary documents supporting their claim that the gross profit was included in the disclosure of ?2 crores. The Tribunal upheld the decision of the authorities below, dismissing the appeal of the Assessee.

In conclusion, the Tribunal upheld the addition of gross profit on the deficit of stock and dismissed the appeal regarding whether the disclosure of ?2 crores included the gross profit on unaccounted sales. The Assessee's arguments were not supported by sufficient evidence, leading to the dismissal of the appeal.