2014 (5) TMI 466 - AT - Income Tax

Deletion of voluntary disclosure of unaccounted income Held that - The assessee has furnished the supporting evidences in respect of the sale value of the unaccounted stock - The AO has not made any enquiry on the evidences given by the assessee Relying upon Commissioner of Income-Tax, Gujarat Versus A. Raman And Company 1967 (7) TMI 2 - SUPREME Court - the law does not oblige a trader to make the maximum profit that he can out of his trading transactions - Income which accrues to a trader is taxable in his hands - income which he could have, but has not earned is not made taxable as income accrued to him. CIT(A) has rightly observed that the assessee in its return of income offered for taxation the sale value of undisclosed stocks discovered during survey and not the full value of investment in undisclosed stock it makes no difference to the income which would ultimately arise to the appellant during the year from unexplained stocks discovered during survey - The Revenue has not brought any material on record suggesting that the claim of the assessee is false or without any basis. Therefore, we do not find any infirmity in the order of the ld.CIT(A), the same is hereby upheld. Thus, this ground of Revenue s appeal is dismissed. Deletion on account of fall in GP rate Held that - CIT(A) was rightly of the view that the argument of the assessee is found to be broadly acceptable but fall in G.P. indicates suppression of income and therefore made a lump sum addition - no such addition on account of fall in GP was warranted because the explanation given by the assessee was broadly acceptable to the AO and he has not given any reason for partial non-acceptance nor has he shown any specific defects in the books - the AO was not justified in making lump sum addition without pointing out any specific defect there was no infirmity in the order of the CIT(A) Decided against Revenue.

Summary

Issues Involved:
1. Deletion of addition of unaccounted income
2. Deletion of addition due to fall in GP rate

Deletion of Addition of Unaccounted Income:
The case involved a dispute regarding the addition of Rs.15,55,285 made on account of disclosure of unaccounted stock by the assessee. The Revenue contended that the deletion of the addition by the CIT(A) was unjustified as the assessee had initially provided a value for the stock during the survey. On the other hand, the assessee argued that the valuation was based on estimation during the survey and provided documentary evidence supporting a different value. The ITAT observed that the assessee had offered the sale value of the undisclosed stock for taxation in its return, not the full investment value. The ITAT also noted that the AO did not investigate the evidence provided by the assessee. Referring to legal precedent, the ITAT upheld the CIT(A)'s decision, emphasizing that the Revenue failed to disprove the assessee's claim that the unaccounted stock was sold at a higher value. The ITAT concluded that no infirmity existed in the CIT(A)'s order and dismissed the Revenue's appeal regarding this issue.

Deletion of Addition Due to Fall in GP Rate:
The second issue pertained to the deletion of an addition of Rs.1 lakh made by the AO due to a fall in the Gross Profit (GP) rate. The AO contended that the fall in GP rate indicated income suppression, leading to the addition. However, the CIT(A) found the assessee's explanation broadly acceptable and deleted the addition. The ITAT concurred with the CIT(A)'s decision, noting that the AO did not specify any defects in the assessee's explanation to warrant the addition. Consequently, the ITAT upheld the CIT(A)'s order on this issue and rejected the Revenue's appeal.

General Adjudication:
The ITAT mentioned that the third and fourth grounds of the Revenue's appeal were general in nature and did not require separate adjudication. Therefore, these grounds were not individually addressed. Ultimately, the ITAT dismissed the Revenue's appeal, upholding the decisions of the CIT(A) on both issues discussed in the judgment.