2013 (3) TMI 515 - HC - Income Tax

Adoption of sales figures - Whether ITAT was right in holding deletion of addition of Rs. 98,813/- by the CIT(a) by observing that the sales should not be estimated at the figure of Rs. 2.30 crores and total sales should be restricted to the figure declared by the assessee at Rs. 1,67,19,652/- by enhanced by Rs. 9.10 lakhs? - Held that - As CIT(A) has found that sales to the tune of Rs. 7,49,608/- were affected outside the books of account and therefore the gross profit rate has to be applied in respect of the said amount alone. Consequently, the addition of Rs. 98,813/- (48,813 50,000/-) was set aside. The said finding is pure finding of fact. No question of law on the basis of such finding arises for consideration, as only income from concealed sales could be taken into consideration. Interest charged under Section 215/217 - ITAT disposed of the additional ground regarding cancellation by the CIT (A) of interest by observing that the department has challenged only the admission of additional ground by the CIT(A) and also not impliedly challenged the decision on merits - Held that - As the department has more amount in its control than the amount of advance tax payable by the assessee. Therefore, it cannot be said that assessee is liable to pay interest on the amount of advance tax. We do not find any substantial question law arises for consideration in the present appeal.

Summary

Issues:
1. Interpretation of Income Tax Act, 1961 regarding addition of concealed income.
2. Application of gross profit rate and assessment of undisclosed sales.
3. Liability to pay interest under Sections 215 and 217 of the Act.

Analysis:

Issue 1:
The case involves a dispute over the addition of concealed income by the Assessing Officer based on estimated sales figures. The Commissioner of Income Tax (Appeals) set aside the addition, emphasizing that only profits earned on unrecorded sales should be considered for addition. The Commissioner referred to a previous decision by the ITAT, Amritsar, regarding proportionate basis for calculating undisclosed investments. The High Court upheld the Commissioner's decision, stating that the addition of Rs. 98,813 was not justified, as the appellant had already surrendered a significant sum during the search. The Court emphasized that only income from concealed sales should be considered for addition, leading to the dismissal of the Revenue's petition.

Issue 2:
Regarding the application of the gross profit rate and assessment of undisclosed sales, the Court noted that the sales affected outside the books of account should be the basis for applying the gross profit rate. The Commissioner found that only a specific amount of sales was unrecorded and, therefore, only profits from those sales should be subject to addition. The Court agreed with this finding, emphasizing that the addition should be based on the income from concealed sales alone. This led to the dismissal of the Revenue's petition challenging the Tribunal's decision.

Issue 3:
The case also addressed the liability to pay interest under Sections 215 and 217 of the Act. The Commissioner found that the assessee had requested the adjustment of a seized amount towards tax due, relieving them from paying interest. The Tribunal upheld this decision, leading to the rejection of the Revenue's petition seeking to raise substantial questions of law. The Court concurred with the Tribunal's decision, stating that the assessee was not liable to pay interest on the advance tax amount, as the department had more funds in its control than the tax payable by the assessee. Consequently, the appeal was dismissed.

In conclusion, the High Court affirmed the decisions of the Commissioner of Income Tax (Appeals) and the Tribunal, emphasizing the importance of accurately assessing concealed income and applying the gross profit rate based on unrecorded sales. The Court also clarified the liability to pay interest under the relevant sections of the Income Tax Act, ultimately dismissing the Revenue's petition and upholding the lower authorities' findings.