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2018 (7) TMI 1756 - AT - Income TaxSuppressed turnover - Held that - Even though a paper book has been filed, with reference to the admitted turnovers and the rate of profit to be estimated relying on various case law, no material has been placed contesting the turnover determined by the AO as total turnover and the suppressed turnover. Since no evidence has been placed by assessee to differ from the findings of the Ld.CIT(A), we are in agreement with the order of the CIT(A) in para 6.1 with reference to determination of suppressed turnover. Consequently, the impugned suppressed turnover ₹ 6.93 Crores stands confirmed and grounds of assessee on this issue are rejected. Estimation of profit - Held that - In this case, the quantification itself was done on the third party registers where only the indicative sale prices were recorded. Since more than 70% of the turnover was recorded and the profit at 4% was accepted by AO, we are of the opinion that estimation at 12.5% is reasonable on the facts of the case. Ld. Jurisdictional High Court in the case of ACIT Vs. Ravi Foods Pvt. Ltd., has confirmed net profit rate of 3.91%. That case however, pertain to a food business case, but not real estate. Generally in real estate/contract cases, profit is estimated at 12.5%. As assessee has mostly sold real estate plots, we are of the opinion that estimation of income at 12.5% on the suppressed turnover will meet the ends of justice. Accordingly, modifying the order of CIT(A), we direct the AO to determine the profit at 12.5% of the determined suppressed turnover.
Issues Involved:
1. Quantification of suppressed income. 2. Determination of suppressed turnover. 3. Treatment of suppressed receipts as income. 4. Estimation of profit on suppressed turnover. Detailed Analysis: 1. Quantification of Suppressed Income: The assessment proceedings were initiated following a search and seizure operation where certain incriminating materials were found. The Assessing Officer (AO) quantified suppressed gross receipts at ?6,93,31,764/- for the assessee's two ventures. The AO determined the total gross receipts at ?21.96 Crores, with accounted turnover at ?15.03 Crores, leading to a suppression difference of ?6.93 Crores distributed across the assessment years 2012-13 to 2015-16. 2. Determination of Suppressed Turnover: The assessee contended that the quantification was incorrect, arguing that the registers maintained by agents reflected suggestive rates rather than actual sale prices. However, the Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's methodology, stating that the quantification was based on solid evidence from the seized materials. The CIT(A) dismissed the assessee's grounds regarding the invalidity of quantification, finding the AO's approach logical and correct. 3. Treatment of Suppressed Receipts as Income: The AO treated the entire suppressed receipts as income, but the assessee argued that only the profit element should be taxed. The CIT(A) agreed with the assessee to some extent, referencing several case laws, including the Gujarat High Court's decision in CIT vs. Sharda Real Estate (P) Limited, which held that only the profit embedded in unaccounted receipts should be taxed. The CIT(A) ultimately determined the profit percentage at 40%, rather than the 4% suggested by the assessee, based on the nature of the business and evidence from the search. 4. Estimation of Profit on Suppressed Turnover: Both the assessee and the Revenue contested the CIT(A)'s decision. The assessee argued that the profit estimation was too high, suggesting a profit rate of 4% to 8%. The Revenue contended that the entire suppressed turnover should be treated as income. The Tribunal considered various case laws and the nature of the business, concluding that a fixed profit percentage could not be universally applied. The Tribunal found that a profit estimation at 12.5% on the suppressed turnover was reasonable, modifying the CIT(A)'s order accordingly. Conclusion: The Tribunal upheld the quantification of suppressed turnover at ?6.93 Crores but modified the profit estimation to 12.5% of the suppressed turnover. The appeals of the assessee were partly allowed, and the appeals of the Revenue were dismissed. The Tribunal emphasized that only the profit element of suppressed receipts should be taxed, following established legal precedents.
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