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2019 (2) TMI 2108 - AT - Income TaxIssues Involved: 1. Delay in filing appeals. 2. Deletion of addition made towards estimation of Gross Profit (G.P.). 3. Suppression of sales and turnover. 4. Estimation of income and Gross Profit rate. 5. Reliability of books of accounts. 6. Evidentiary value of seized materials. 7. Validity of retraction of statements by employees. 8. Investment in immovable properties. Detailed Analysis: 1. Delay in Filing Appeals: The Revenue initially filed a single appeal covering three assessment years (AYs 2005-06, 2006-07, and 2007-08). Upon recognizing the discrepancy, two separate appeals were filed later, resulting in a noted delay of 742 days. However, the Tribunal opined that the delay should be reckoned from the original date of filing, thus considering the appeals filed in time. 2. Deletion of Addition Made Towards Estimation of G.P.: The Revenue challenged the CIT(A)'s deletion of additions based on estimated G.P. The CIT(A) had observed that the AO's estimation of suppressed profit and G.P. rate lacked a factual basis and was reliant on assumptions. The CIT(A) emphasized that only real income could be taxed, leading to the deletion of the additions for AYs 2005-06, 2006-07, and 2007-08. 3. Suppression of Sales and Turnover: During a search at the assessee's business premises, it was found that sales were often recorded on 'estimate slips' rather than sale bills, leading to under-recording of sales and suppression of turnover. Evidence included discrepancies in daily summary sheets, statements from employees, and note books showing significant variations in accounting purchases and issues. The AO concluded that only 30% of the actual turnover was accounted for, estimating the remaining 70% as suppressed sales. 4. Estimation of Income and Gross Profit Rate: The AO initially adopted a G.P. rate of 22% on the estimated suppressed turnover, later revising it to 20%. The CIT(A) noted that the AO's estimation was based on findings from AY 2008-09 and lacked new factual evidence for earlier years. The Tribunal, however, upheld the AO's estimation, citing the consistent pattern of suppression across the years. 5. Reliability of Books of Accounts: The AO rejected the books of accounts as unreliable due to various discrepancies, including unaccounted sales, mismatched entries, and discrepancies in cash books. The Tribunal agreed with the AO, noting that the books did not reflect the actual sales or transactions. 6. Evidentiary Value of Seized Materials: The Tribunal emphasized that the seized materials, including computer data and estimate slips, provided clear evidence of suppressed sales. The Tribunal upheld the AO's use of these materials for estimating the income for the relevant assessment years. 7. Validity of Retraction of Statements by Employees: The CIT(A) accepted the retraction of statements by the assessee's employees, who claimed they admitted to suppression out of fear. The Tribunal, however, found the retraction invalid, noting that the statements were made voluntarily and without coercion. The Tribunal relied on the original statements and corroborative evidence from the search. 8. Investment in Immovable Properties: The Revenue argued that the income from unaccounted sales was invested in immovable properties, with significant investments made during the relevant years. The Tribunal noted that the AO had linked these investments to the suppressed income, supporting the conclusion of income concealment. Conclusion: The Tribunal upheld the AO's estimation of suppressed turnover and G.P. rate, confirming the unreliability of the assessee's books of accounts and the validity of the seized materials as evidence. The appeals of the Revenue were allowed, and the deletions made by the CIT(A) were set aside.
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