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TMI Blog2014 (2) TMI 785X X X X Extracts X X X X X X X X Extracts X X X X ..... d thereafter applying the net profit rate @ 3% restricted the addition to Rs. 11 lacs as against Rs. 35 lacs made by A.O - Revenue has pointed out that CIT(A) has worked out the sales on the basis of entries found in diary and considering the number of days to be 43 instead of 18 days and therefore the addition has been worked out to a lower figure - Assessee on the other hand has submitted that CIT(A) has proceeded on the basis of presumption but at the same time, the Assessee has also not brought any material on record to controvert the findings of CIT(A) – thus, the addition is restricted to Rs. 5 lac as against the addition of Rs. 35 lac made by A.O. and which was sustained at Rs. 11 lac by CIT(A) – Decided partly in favour of Revenue. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f to the Assessee. Aggrieved by the aforesaid order of CIT(A), the Assessee as well as Revenue are now in appeal before us. 5. The effective grounds raised by the Revenue in present reads as under:- 1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition made on account of unaccounted income disclosed of Rs. 35,00,000/- during the course of survey proceedings. 2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in allowing deduction against the income disclosed during the course of survey to the tune of Rs. 35,00,000/-. 6. The effective grounds raised by the Assessee reads as under:- 1. The ld. CIT(A) has erred in law and in facts in estim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oted in the diaries were gross sale receipts and were not net profits. It was further submitted that only net profit was liable to tax and not the gross sales receipts. It was further submitted that the grand total of all the amounts of sales mentioned in the diaries aggregated to Rs. 21,03,466/- which was fairly below the amount of Rs. 50 lacs which was declared erroneously during the survey. It was further submitted that the gross profit margin of the business for the year under consideration was 2% and therefore the profit which can be subjected to tax could be Rs. 42,069/-(Rs. 21,03,466 x 2%). The submission of the Assessee was not found acceptable to the A.O. for the reason that during the course of survey proceedings, the survey party ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tement on oath (supra) that some of the receipts are missing. Therefore, it cannot be accepted that there has been no ' Unaccounted Sales ' except for the period of 43 days referred supra, more so, when it was admitted that some of the receipts are missing. If we calculate the 'unaccounted ' turnover of entire year on proportionate basis, we get an unaccounted turnover of Rs 1, 78,55,002/- ( Rs 21.03,466 / 365) .43 If we round it off to Rs. 1,80,00,000/- and then estimate the seed capital / initial capital required to sustain this turnover, considering the monthly cycle of rotation of funds, the seed capital comes to Rs. 15,00,000 /- ie. (18,00,000/-). 12 8.3 Moreover, as discussed supra, the gross profit of 2 % is very low considering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the same, if the appellant's turnover is estimated at Rs 4.2 Crores including the disclosed turnover (Rs 2. 4 crores + Rs 1.8 crores ) and net profit on the same is estimated @ 3 %, we get a net profit of Rs. 12. 6 Lakhs, which may be rounded off to Rs 13 Lakhs. Once, the estimation of seed capital / initial capital of Rs 15 Crores is added to it, the total income comes to Rs 28 Lakhs. If we reduce the total income as per computation of income of Rs 16,87,876/- from this amount, the remaining amount comes to Rs. 11,12,124/- which may be rounded of to Rs 11,00,000/- . Therefore, the addition of Rs. 35,00,000/- made by the A.O. is reduced to Rs. 11, 00,000/-. 8.6 The addition has been sustained on the basis of estimation of total turnov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted the order of A.O. 11. The ld. A.R. on the other hand submitted that the entries in the diaries were cash sales aggregating to Rs. 21,03,466/- which were not recorded in the books of Assessee and there was shortage of stock in trade to the tune of Rs. 22,671/- but however Assessee admitted a sum of Rs. 50 lacs as unaccounted income. He further submitted that since the disclosure of Rs. 50 lac was much higher than what should be chargeable to tax, Assessee had only offered Rs. 15 lacs to cover all discrepancies and shortage of stock found during the course of survey. He further submitted that the assumptions made by CIT(A) for sustaining the addition is on the basis of assumption and not supported by any material on record. He therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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