2018 (12) TMI 753 - AT - Income Tax

Addition on account of Gross Profit not offered for taxation - difference in purchases - difference in the purchases as reflected in Form 26AS and the books of accounts - Held that - The assessee has successfully proved that there is no major difference in the purchases as reflected in Form 26AS and the books of accounts except for a minor difference of ₹ 2,82,389/- which has already been added by Ld.CIT(A) to the income disclosed by the assessee and the finding of the CIT(A) has not been controverted by the Departmental Representative. No reason to interfere in the finding of Ld.CIT(A) deleting the addition of ₹ 46,11,148/- made by the A.O on account of estimation of gross profit on the estimated sales calculated on the basis of alleged difference in purchases - Decided against revenue

Summary

Issues:
Appeal filed by Revenue against Ld. CIT(A)'s order deleting addition of ?46,11,148 on account of Gross Profit not offered for taxation.

Detailed Analysis:

1. Background: The appeal pertains to Assessment Year 2009-10, where Revenue challenged Ld. CIT(A)'s order deleting the addition of ?46,11,148 made by the Assessing Officer (AO) on account of Gross Profit not declared for taxation.

2. Factual Findings: The assessee, a partnership firm in liquor business, filed income tax return declaring ?1,21,41,551. AO observed a purchase mismatch and issued notice u/s 148 for alleged income escapement of ?61,11,148.

3. AO's Addition: The AO, based on alleged purchase difference of ?84,49,668, estimated unaccounted sales at ?1,39,85,890, adding Gross Profit of ?46,11,148 @ 33.97%, assessing income at ?1,81,41,818.

4. Appeal and Findings: Assessee appealed to Ld. CIT(A) and succeeded in deleting the ?46,11,148 addition. However, Ld. CIT(A) upheld addition of ?2,82,339 for purchase difference, unchallenged by assessee.

5. Arguments: Revenue argued in support of AO's findings, while assessee's counsel relied on Ld. CIT(A)'s decision, submitting reconciliation statement showing minor purchase difference.

6. Judgment: After considering contentions and records, ITAT found no major purchase difference except ?2,82,389. Ld. CIT(A)'s finding, deleting ?46,11,148 addition, remained unchallenged by Revenue. Hence, ITAT upheld Ld. CIT(A)'s decision, dismissing Revenue's appeal.

7. Conclusion: ITAT dismissed Revenue's appeal, affirming Ld. CIT(A)'s deletion of ?46,11,148 addition. The judgment emphasized the lack of substantial purchase variance and the failure to substantiate gross profit estimation based on purchase differences, leading to the decision in favor of the assessee.

This detailed analysis outlines the key aspects of the legal judgment, including the background, factual findings, AO's addition, appeal process, arguments presented, final judgment, and the conclusive decision by the ITAT.