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TMI Blog2017 (1) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 70 lakhs to ₹ 1.40 crores, accordingly we direct the A.O. to accept turnover declared by the assessee. In so far as assessment year 2012-13, the assessee has admitted an unaccounted turnover of ₹ 1,45,76,675/- for the period of 4 months from Dec’11 to Mar’12 and further ₹ 60 lakhs for the period of 8 months from Apr’11 to Nov’11. As against this, the A.O. has estimated an additional turnover of ₹ 2,91,53,350/- for the period of 8 months based on the turnover of the period Dec’11 to Mar’12. Though the CIT(A) has reduced turnover estimated by the A.O. from ₹ 2,91,53,530/- to ₹ 80 lakhs, fails to give any reasons for estimating higher turnover of ₹ 80 lakhs. Therefore, we are of the view that the CIT(A) was incorrect in adopting higher turnover as against turnover declared by the assessee. Hence, we direct the A.O. to adopt turnover declared by the assessee in the revised return filed in response to notice u/s 148 of the Act. Estimation of net profit the assessee has declared a net profit of 12.99% to 16.74% for the year ended 31.3.2010 and 31.3.2011, we deem it appropriate to direct the A.O. to estimate net profit of 20% on total sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey, certain incriminating documents found and impounded reveals that the assessee has not disclosed certain bank accounts, purchases and also suppressed sales. The survey party seized billing machine which reveals the unaccounted turnover of ₹ 1,45,76,675/-. During the course of survey proceedings on 12.11.2012, a statement was recorded from the assessee, wherein the assessee has admitted that the sales found from two billing machines for the period December, 2011 to March, 2012 has not been included in the regular books of accounts maintained for that period. Therefore, agreed that he would include the sales made for the period from Dec 11 to Mar 12 in the revised return filed. 3. Subsequently, the case has been re-opened by issuing notice u/s 148 of the Income Tax Act, 1961 (hereinafter called as 'the Act') for the reason that income chargeable to tax had been escaped assessment within the meaning of section 147 of the Act. The assessee has filed revised return for the assessment year 2011-12 on 1.3.2013 admitting total income of ₹ 22,09,314/- as against the original income return of ₹ 9,84,314/-. But, the assessee has filed a letter on 6.3.2013 stati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iny proceedings, the assessee was called upon to explain why the cash deposits in the bank account with Axis Bank amounting to ₹ 6,95,170/- should not be considered as unexplained income and subject to tax. The A.O. noted that during the post survey investigation, the assessee had admitted that the said account belongs to him, however, it was claimed that the deposits into the said account partly represents money belonging to his friends and partly from the withdrawal of his capital account. When assessee was called upon to explain the credits, the assessee failed to establish the nexus between the capital withdrawal and cash deposits in the bank account. Therefore, the A.O. opined that credits found in the bank account represents undisclosed income of the assessee and accordingly added an amount of ₹ 6,88,500/- to the total income. It is the contention of the assessee that cash deposits in the bank account are out of withdrawals from capital account of his business. The assessee further contended that the A.O. was not justified in making the total credits found in the bank account and if at all, any addition is required, the additions can be made only to the peak credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ining period of 8 months from Apr 11 to Nov 11. Therefore, issued a show cause notice and asked to explain why the turnover shall not be estimated for whole year based on the turnover found for the period of 3 months from Dec 11 to Mar 12. In response to show cause notice, the assessee has submitted that the turnover for the remaining period of 8 months cannot be estimated at the level of turnover found for the period of 3 months. The assessee further submitted that the business for the period from December to March is always high and for the remaining period, the turnover would be around ₹ 6 to 8 lakhs per month, therefore, estimating a turnover for the whole year based on the turnover of 3 months equally is incorrect. The A.O. after considering the explanations of the assessee, held that the assessee himself has admitted unaccounted turnover of ₹ 1,45,76,675/- for the period of 3 months and also admitted additional turnover of ₹ 60 lakhs for the remaining period of 8 months. The A.O. further observed that the profit margin in unaccounted turnover is normally high, because the assessee will claim all overheads in the regular turnover disclosed for the period. Wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. The A.O. has estimated a proportionate turnover for the remaining period of 8 months and estimated net profit of 60% on such turnover, however, accepted turnover declared by the assessee for the assessment year 2011-12, but estimated higher net profit of 60% as against net profit declared by the assessee. During the course of appellate proceedings, the CIT(A) has re-worked unaccounted turnover for the assessment year 2011-12 and 2012-13 wherein the CIT(A) has enhanced the turnover for the assessment year 2011-12, but scaled down net profit from 60% to 25%. It is the contention of the assessee that the CIT(A) was erred in estimating turnover for the assessment year 2011-12 based on the information pertains to assessment year 2012-13. If at all, estimation is possible, the estimation can be made based on the details of part period to the remaining period, but it cannot be extended to the previous or subsequent financial year. 11. Having heard both the sides, we find force in the arguments of the assessee for the reason that though estimation of turnover is possible for the remaining period of the financial year based on the inputs of a part period, it cannot be extended to pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considering the additional net profit of 17.5% disclosed on unaccounted turnover, the average net profit works out to 12.99%. Therefore, the CIT(A) was erred in considering the net profit of 25% on total turnover including additional turnover. We find force in the arguments of the assessee, for the reason that although net profit is slightly on higher side in the unaccounted turnover, the possibility of overheads in the unaccounted turnover cannot be ruled out. Though the assessee has considered overheads in the regular books of accounts, the purchase component on unaccounted turnover and possibility of other overheads cannot be ignored. Moreover, the assessee is in the business of sale of sweets which is highly perishable in nature and accordingly, the cost of manufacture of sweets is normally high. Therefore, considering the overall facts and circumstances of the case and also fact that the assessee has declared a net profit of 12.99% to 16.74% for the year ended 31.3.2010 and 31.3.2011, we deem it appropriate to direct the A.O. to estimate net profit of 20% on total sales including unaccounted sales. Accordingly, we direct the A.O. to estimate net profit of 20% on total sales f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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