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2013 (11) TMI 315 - AT - Income TaxAddition u/s 68 of the Income Tax Act - Credit in the bank account treated as sales of the assessee instead of income of the assessee Held that - Purchase of Rs. 2,94,44,341/- by M/s. SOL from Shri. T.Kishan has been proved. Shri T.Kishen has confirmed the supply of assets and most of the assets were found on a physical verification. In this view of the finding of the ITAT in the case of SOL, even the type 2 sales amounting to Rs. 2,94,44,341/- found in the course of search, would appear to represent actual sale of goods by the Assessee. The Assessing Officer has assessed profit of 4.38% on the undisclosed sale of Rs. 2,09,66,145/-. The CIT(A) has reduced the rate of profit on this amount to 4% and the department has accepted the same. There is no reason to treat the other portion of the undisclosed sale of Rs. 2,94,44,341/- differently. Therefore the order of the ClT(A) holding that only profit @4% on the turnover of Rs. 2,94,44,341/- should be assessed is reasonable and liable to be upheld Decided against the Revenue.
Issues:
1. Appeal against CIT(A)'s order by Revenue. 2. Consideration of bank account credits as sales or income. 3. Determination of undisclosed turnover and income. 4. Addition of Rs. 2,94,44,341/- as undisclosed income. 5. Dispute over profit estimation on transactions. Issue 1: Appeal Against CIT(A)'s Order by Revenue The Revenue filed an appeal against the CIT(A)'s order dated 31.12.2012. The grounds of appeal included contentions that the CIT(A) erred in considering bank account credits as sales instead of income, failed to acknowledge the nature of credits, and directed the Assessing Officer to estimate profit at a specific rate despite the Assessee's admission of a different profit rate. Issue 2: Consideration of Bank Account Credits The dispute revolved around the nature of credits in the bank accounts amounting to Rs.2,94,44,341/-. The Assessing Officer treated these credits as undisclosed income of the Assessee, while the CIT(A) partly allowed the appeal and deleted this addition. The CIT(A) acknowledged the distinction between "Type 1" and "Type 2" transactions, with the latter being considered accommodation bills. The Assessing Officer's protective addition was contested by the Revenue. Issue 3: Determination of Undisclosed Turnover and Income The Assessing Officer computed the undisclosed turnover for both concerns of the Assessee based on seized documents indicating suppressed sales and accommodation entries. The total undisclosed turnover was assessed at Rs.1,48,63,228/- for the block period. The CIT(A) analyzed the Assessing Officer's calculations and made adjustments in the assessment of undisclosed turnover and income. Issue 4: Addition of Rs. 2,94,44,341/- as Undisclosed Income The Assessing Officer made a protective addition of Rs. 2,94,44,341/- as undisclosed income, which was partly allowed by the CIT(A). The CIT(A) upheld the addition of profit derived from transactions at 4%, despite the Revenue's contentions against this decision. Issue 5: Dispute Over Profit Estimation The disagreement arose regarding the estimation of profit on transactions, specifically on the sales to M/s. SOL group. The CIT(A) directed the estimation of profit at 4% on the turnover of Rs. 2,94,44,341/-, differing from the Assessing Officer's approach. The Revenue contested this decision, citing findings from the ITAT in the case of M/s. SOL to support their argument for confirming the Assessing Officer's addition of the entire amount as undisclosed income. This detailed analysis of the legal judgment highlights the key issues, arguments, and decisions made by the authorities involved in the case.
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