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2024 (6) TMI 858 - ITAT RAJKOTUndisclosed sales - NP determination - CIT(A) restricting the addition to the net profit element in the same - contention of the Revenue was that the lCIT(A) ought to have applied 12.5% net profit rate instead of 8% - It was pointed out that during search at the residential premises of the director of the assessee-company, various incriminating material by way of WhatsApp message/images were discovered alongwith material from the mobile phone of the director of the assessee-company, thus discovered assessee had made out of books sales - HELD THAT - Revenue has not given any basis to justify applying higher rate of net profit at 12.5%. It is basic common sense that net profit to be applied is to be at justifiable rate depending upon nature of the business and other facts. It cannot be simply an adhoc rate; there has to be a reasonable basis for applying a particular net profit rate in each case. The ld.DR has not supported his contention of applying 12.5% GP rate with any reasonable basis. The decision of Hon ble Gujarat High Court 2013 (10) TMI 1028 - GUJARAT HIGH COURT has also not been pointed out to be rendered in the context identical to the activities carried out by the assessee so as to justify his stand of applying the rate held by the Hon ble High Court to be a justifiable rate in that case. Therefore, we do not find any merit in the contentions of the ld.DR that the ld.CIT(A) ought to have been applied a net profit of 12.5% in the present case. The contention of the ld.DR is, therefore rejected, and the ground raised by the Revenue is accordingly rejected. Issues:
The judgment involves the appeal filed by the Revenue against the order passed by the ld.Commissioner of Income Tax(Appeals)-11, Rajkot u/s 250(6) of the Income Tax Act, 1961, pertaining to the Asst.Year 2019-20. The assessee also filed a Cross Objection (CO) against the same order, both of which are disposed of by this common order. Issue 1: Delay Condonation The CO filed by the assessee was noted to be time-barred by 15 days. The delay was condoned by the Tribunal in the interest of justice, allowing adjudication on merits. Issue 2: Addition of Undisclosed Sales The Revenue's appeal focused on the deletion by the ld.CIT(A) of the addition made to the income of the assessee on account of undisclosed sales. The ld.CIT(A) restricted the addition to the net profit element in the sales, while the assessee challenged this by seeking deletion of the entire addition. Details of the Judgment: The Tribunal considered the incriminating material found during a search at the director's premises, revealing undisclosed sales by the assessee. The AO added the entire sales to the income, but the ld.CIT(A) restricted it to the profit element at 8% of the sales. The Revenue raised various grounds challenging the ld.CIT(A)'s decision, arguing for a higher net profit rate of 12.5%. The Tribunal noted the lack of justification for applying a higher rate and rejected the Revenue's contentions. Regarding the CO filed by the assessee, it was observed that the ld.CIT(A) did not give credit for the income voluntarily surrendered by the assessee. The Tribunal directed the AO to grant the benefit of the surrendered income against the addition confirmed by the ld.CIT(A). In conclusion, the appeal of the Revenue was dismissed, while the CO of the assessee was allowed. The Tribunal's order was pronounced on 12th January 2024 at Ahmedabad.
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