2018 (10) TMI 1033 - AT - Income Tax

GP addition for unaccounted sales - claim of deduction of unaccounted purchases from the unaccounted sales also - amount received by the assessee in cash - the assessee s representative has submitted that there are certain purchases and sales which are not recorded in the books of account - Held that - The assessee after receiving the payments from the prospective buyers, repays the same to the suppliers. The assessee is not able to explain the details of unexplained purchases, quantity of the purchases and also the details of unaccounted sales and source for the unrecorded purchases. Under these facts and circumstances of the case, we are of the opinion that the assessee has failed to prove that he made un-accounted purchases. Therefore, his request for GP addition for unaccounted sales cannot be considered. In view of the above, this appeal filed by the assessee is dismissed.

Summary

Issues:
Assessment of unaccounted sales and purchases, treatment of incriminating material found during search and seizure operations, addition of income based on unrecorded sales, validity of GP addition, dispute over cash and cheque payments, appeal against CIT(A) order.

Assessment of Unaccounted Sales and Purchases:
The assessee, engaged in retail trade of timber, faced assessment due to incriminating material found during search operations. The Assessing Officer treated the entire unrecorded sales amount as credit sales for the relevant assessment year. The assessee claimed that unrecorded purchases were made outside the books of account, leading to unrecorded sales. The CIT(A) confirmed part of the addition but granted relief for the amount received through cheque. The Tribunal analyzed the case, noting the absence of proof for unaccounted purchases and dismissed the appeal, emphasizing the failure to substantiate unrecorded purchases.

Treatment of Incriminating Material:
In the case involving unaccounted sales, the Assessing Officer relied on incriminating material seized during search operations to assess the unrecorded sales. The CIT(A) partially upheld the addition, considering the nature of recorded payments and unrecorded cash sales. The Tribunal reviewed the case, focusing on the discrepancy between recorded cheque payments and unrecorded cash receipts. The appeal was dismissed as the assessee could not provide evidence for unaccounted purchases, leading to the rejection of the Gross Profit addition claim.

Validity of Gross Profit Addition:
The assessee contended that Gross Profit addition should apply only to unrecorded sales, not the entire unaccounted amount. However, the Tribunal found the lack of evidence supporting unrecorded purchases, leading to the dismissal of the appeal based on the failure to substantiate claims regarding unaccounted purchases and sales.

Dispute Over Cash and Cheque Payments:
The dispute centered on the treatment of cash and cheque payments received by the assessee, with the CIT(A) granting relief for the cheque amount but upholding the addition for cash receipts. The Tribunal analyzed the submissions, highlighting the absence of evidence for unaccounted purchases and sales, ultimately dismissing the appeal due to the failure to prove the existence of unrecorded purchases.

Appeal Against CIT(A) Order:
The Tribunal dismissed the appeals filed by the assessee, upholding the CIT(A) order regarding the treatment of unaccounted sales and purchases, emphasizing the need for substantiating claims related to unrecorded transactions. The decision highlighted the importance of providing evidence to support assertions regarding unrecorded purchases and sales, ultimately leading to the dismissal of the appeals.

---