2022 (7) TMI 1143 - AT - Income Tax

Estimation of GP - unaccounted sales - estimation of unaccounted cash sales - HELD THAT - Both sides are in agreement that declared gross profit rate of 1.69% may be applied on estimated unaccounted cash sales from 01.04.2013 to 30.09.2013 to compute the unaccounted income of the assessee and that the same may be confirmed. Consistent with this, both sides are in agreement that out of the aforesaid addition of Rs.30,43,343/-; the aforesaid amount of Rs.11,03,177/- may be confirmed, and the remaining amount of Rs.19,40,168/- may be deleted. In view of the foregoing, and as representatives of both sides were in agreement with this at the time of hearing before us, we direct the AO, in the specific facts and circumstances of the present case before us, to restrict the addition to Rs.11,03,177 and to delete the remaining amount of Rs.19,40,168/- out of the total addition of Rs.30,43,345/-.

Summary

Issues:
1. Rejection of books of account under section 145(3)
2. Addition of gross profit on unaccounted cash sales
3. Estimation of unaccounted cash sales and gross profit post-survey

Analysis:

(A) Rejection of Books of Account:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) for Assessment Year 2014-15. The appellant contested the rejection of books of account under section 145(3), arguing that as the Assessing Officer did not doubt purchases, stock, and expenses, there was no basis for such rejection. The grounds of appeal highlighted the disagreement with the Commissioner's decision.

(B) Addition of Gross Profit on Unaccounted Cash Sales:
The Assessing Officer made an addition of Rs. 30,43,345 on account of gross profit from unaccounted cash sales, estimated at 10% of declared sales. The appellant challenged this addition, arguing that the computation was erroneous. The survey conducted under section 133A revealed evidence of cash sales, leading to the estimation of unaccounted cash sales and subsequent gross profit addition. The Commissioner upheld this addition, prompting the appellant to file the present appeal.

(C) Estimation of Unaccounted Cash Sales Post-Survey:
During the hearing, the appellant contended that the estimation of unaccounted cash sales and gross profit should be limited to the period up to the survey date of 30.09.2013. The appellant argued that there was no incriminating material post-survey to justify extending the estimation period. Both the appellant's counsel and the Departmental Representative for Revenue agreed to disregard the estimation post-survey. The Tribunal directed the Assessing Officer to restrict the addition to Rs. 11,03,177 for the period up to the survey date and delete the remaining amount of Rs. 19,40,168 from the total addition.

(D) Conclusion:
The Tribunal partly allowed the appeal for statistical purposes, directing the Assessing Officer to revise the addition amount in line with the agreed estimation of unaccounted cash sales and gross profit up to the survey date. Grounds 1 and 2 of the appeal were treated as dismissed, while Ground 3 was allowed in light of the Tribunal's direction.

This detailed analysis outlines the issues raised in the appeal, the arguments presented by the appellant, the decision of the Commissioner, and the Tribunal's final direction regarding the estimation of unaccounted cash sales and gross profit.