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2022 (7) TMI 1081 - AT - Income TaxNet profit estimation - undisclosed income - unrecorded receipts / sales - estimated rate of 8% on alleged undisclosed Toll Receipts - assessee is engaged in activity of collection of toll from the commercial vehicles entering in the state of Delhi - HELD THAT - As perused the material placed available in record including the paper books filed by the assessee. It is settled legal position that unrecorded receipts found during the course of search or otherwise cannot be just added in toto and it cannot be considered as unrecorded income in toto unless there are evidence to that effect. Our attention was drawn by the ld. AR towards the various decisions of Paharganj Grah Nirman Sahkari Samiti Ltd. Ors. 2005 (10) TMI 237 - ITAT JAIPUR wherein profit was estimated on the unrecorded receipts / sales and same was added as income. Considering the various decisions and the facts and in the circumstances of the case, it is held that the profit element embedded in the unrecorded receipts has to be considered as income and not the entire unrecorded receipts. Accordingly, appeal of the revenue on these grounds is dismissed. Appellant company has offered undisclosed income earned out of unaccounted toll business - CIT(A) has estimated the unrecorded profit @ 8% on unrecorded receipts - On careful consideration of the argument of ld. AR and order of ld. CIT(A) it is seen that the appellant is in business of toll collection and during the course of search evidence of under recording of toll collection was admittedly found. The appellant has offered net profit of Rs. 14 crores in its return filed in response to notice u/s 153A and has stated it is earned out of its under recorded toll collection business. CIT(A) has rightly estimated the income from such unrecorded toll collection receipt @ 8% of the unrecorded receipts. However, there is no merit in the finding of the ld. CIT(A) that this amount is to be added separately and no benefit of telescoping is to be given. It is seen by us that when the appellant has itself offered Rs. 14 crores as income from such unrecorded receipts which is quite more than the estimation of profit so made by ld. CIT(A), therefore separate addition of the aforesaid amount over and above the amount of Rs. 14 crore so declared in the return will tantamount to double addition of the same income and therefore, the same is hereby deleted. Accordingly, the appeal of the appellant company is allowed. CIT-A accepting revised return of income filed by the appellant before the AO - CIT(A) allowed the appeal of the appellant company by considering direct judgement of Gujarat High Court namely CIT Vs. Himgiri Foods Ltd. 2010 (3) TMI 756 - GUJARAT HIGH COURT wherein the Hon ble Court has held that if after the issuance of an intimation, a revised return is filed u/s 139(5), it is incumbent upon the AO to process the revised return and amend the intimation issued u/s 143(1)(a) on the basis of revised return. The Hon ble Court has also held that an intimation u/s 143(1)(a) of the Act cannot be equated with an assessment framed u/s 143(3) of I.T. Act. Considering the above decision, another decision namely S.R. Koshti 2004 (12) TMI 62 - GUJARAT HIGH COURT and also Kiran Infra Engineering Ltd. 2013 (9) TMI 226 - ITAT CHANDIGARH CIT(A) ordered to consider the revised return and income shown therein. The department is in appeal before us. Same argument has been taken as mentioned in the assessment order. We have gone through the facts of the case and legal position on the issue under consideration. Considering the various decisions as referred by the ld. AR and also considered by CIT(A) and there being no contrary decision so cited on behalf of revenue, we find no infirmity in the order of ld. CIT(A) particularly when the revised return was filed within the statutory time limits provided under the Act. In view of the above discussion the ground of appeal taken by the revenue is rejected.
Issues Involved:
1. Confirmation of addition by CIT(A) of Rs. 3,14,08,494/- based on an estimated profit rate on undisclosed toll receipts. 2. Deletion of addition by CIT(A) of Rs. 22,11,97,623/- made by AO on account of undisclosed toll receipts. 3. Consideration of G.P. Rate by CIT(A) instead of entire unaccounted toll receipts. 4. Direction by CIT(A) to consider the revised return of the assessee reducing income by Rs. 1,37,31,490/-. Issue-Wise Detailed Analysis: 1. Confirmation of Addition by CIT(A) of Rs. 3,14,08,494/-: The assessee argued that the CIT(A) erred in confirming the addition of Rs. 3,14,08,494/- by applying an 8% profit rate on undisclosed toll receipts of Rs. 39.26 crores. The assessee contended that it had already declared a net profit of Rs. 14 crores on these receipts, leading to double taxation. The CIT(A) held that unrecorded receipts cannot be added in total as income and only the profit embedded should be considered. The CIT(A) estimated this profit at 8%, resulting in Rs. 3,14,08,494/-. However, the CIT(A) did not allow the benefit of telescoping the Rs. 14 crores already offered by the assessee, as no direct relationship with the seized documents was established. 2. Deletion of Addition by CIT(A) of Rs. 22,11,97,623/-: The department appealed against the CIT(A)'s decision to delete the addition of Rs. 22,11,97,623/- made by the AO on account of undisclosed toll receipts. The CIT(A) found that the AO had considered the unrecorded receipts as unrecorded income in total without substantial evidence. The CIT(A) concluded that only the profit element embedded in these receipts should be added as income, not the entire receipts. This decision was supported by various precedents, including the Gujarat High Court's ruling in CIT Vs. President Industries, which held that only the profit from unrecorded sales should be added as income. 3. Consideration of G.P. Rate by CIT(A) Instead of Entire Unaccounted Toll Receipts: The department contended that the CIT(A) erred in considering only the G.P. Rate and not the entire unaccounted toll receipts. The CIT(A) determined that the entire unrecorded receipts could not be added as income without evidence. The CIT(A) estimated the profit embedded in these receipts at 8%, aligning with past records and profit results of the assessee company. This approach was consistent with legal precedents, which supported adding only the profit element from unrecorded receipts as income. 4. Direction by CIT(A) to Consider the Revised Return of the Assessee: The department challenged the CIT(A)'s decision to accept the revised return of income filed by the assessee, which reduced the income by Rs. 1,37,31,490/-. The original return was filed at Rs. 4,46,36,280/-, and the revised return at Rs. 3,09,04,790/-. The AO did not consider the revised return, citing that it was filed after the intimation u/s 143(1). The CIT(A) allowed the appeal, referencing the Gujarat High Court's ruling in CIT Vs. Himgiri Foods Ltd., which mandated processing the revised return and amending the intimation issued u/s 143(1)(a). The CIT(A) found no infirmity in accepting the revised return as it was filed within statutory time limits. Conclusion: The appeal filed by the assessee was allowed, and the revenue's appeal was dismissed. The CIT(A)'s approach of considering only the profit element from unrecorded receipts was upheld, and the revised return of income filed by the assessee was accepted. The decision emphasized that unrecorded receipts cannot be added in total as income without substantial evidence, and only the profit embedded should be considered.
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