2014 (2) TMI 253 - AT - Income Tax

Addition made - Unaccounted production and profits on unrecorded sales Held that - The entire addition was made by the AO based on the findings of the Central Excise Department - additions was made by the AO - the CIT(A) modified the same by sustaining addition by adapting the G.P on sale @ 40% amounting being unaccounted investment for effecting the sale - The addition made and sustained by the AO and CIT(A) is not appropriate 12.5% margin on such uncounted sale will suffice to be considered as profit on such uncounted sale where by additions have to be made Decided partly in favour of Assessee.

Summary

Issues:
Addition based on unaccounted production and profit on unrecorded sales.

Analysis:
The appeal was against the order of the CIT(A) sustaining the addition made by the AO regarding unaccounted production and profit on unrecorded sales. The AO had made the addition based on information from the Central Excise Department that goods were removed without payment of excise duty. The assessee failed to provide month-wise sales details for verification. The CIT(A) confirmed the addition, relying on a previous decision for a similar issue. The AR argued that the addition was based on presumption without concrete evidence. Citing legal precedents, the AR contended that only gross profit could be taxed, not the entire unaccounted sales amount. The AR also referred to cases where additions could not be made without supporting evidence.

The DR supported the lower authorities' orders. The Tribunal analyzed the case, noting the addition was solely based on the Excise Department's findings. The assessee couldn't prove the sales were recorded in the books. The AO made an addition for unaccounted sales and profit. The CIT(A) modified the addition, considering a 40% GP on sales and an unaccounted investment. The Tribunal disagreed with the amounts added by the lower authorities and referred to previous decisions. It concluded that a 12.5% margin on unaccounted sales sufficed for profit calculation, sustaining an addition of Rs. 64,830. The appeal was partly allowed.

In conclusion, the Tribunal considered the evidence, legal arguments, and precedents to determine the appropriate addition for unaccounted sales and profit. The decision balanced the need for additions with the principles of taxation and legal standards, resulting in a revised amount for profit inclusion.