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TMI Blog2018 (12) TMI 634X X X X Extracts X X X X X X X X Extracts X X X X ..... , but not the gross profit. Having admitted the additional income of ₹ 11,04,500/- for an aggregate turnover of ₹ 3. 84 crores on the suppressed turnover at 3. 23% which the AO has accepted, we find no reason to tax the gross profit once again. At the cost of repetition we observe that the AO failed to establish that the turnover found was pertaining to the assessee and did not bring any material to support the contention, Therefore we hold that estimation of income on the suppressed turnover as per the net profit at 3. 23% is reasonable and meets the ends of justice. The estimation of profit at 3. 23% each year is in addition to the income already admitted by the assessee for the A. Y. 2011-12. Accordingly, we direct the AO to compute the income estimating the net profit @3. 23% on the difference of turnover each year independently - decided partly in favour of assessee. - I.T.A. Nos. 28-30 /Viz/2017 - - - Dated:- 7-12-2018 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER For The Appellant : Shri G.V.N.Hari, AR. For The Respondent : Smt. Suman Malik, DR ORDER PER D. S. SUNDER SINGH, Accountant Member: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,93,05,488 64,19,937 1,28,85,551 3. 2009-10 2010-11 2,24,55,442 98,89,160 1,26,66,282 The AO directed the assessee to explain the difference. In response to the notice issued, the assessee submitted that the turnover declared by the assessee in the return of income was correct and there was no difference as alleged. During the relevant years, the firm was managed by Sri Sukhavasi Srinivasa Rao and the return of income was filed by the said managing partner duly verifying books of accounts. The assessee did not accept contention of the AO that the material found in the premises of Mr Rao was related to the assessee firm and submitted that the turnover found in the premises of Mr. Rao does not belong to the firm. The AO did not accept the explanation/contentions of the assessee stating that the material/papers impounded clearly indicates the name of the firm as Nakshtra hotels and thus, held that the material pertains to Nakshtra hotels only. Summons u/s 131 were issued to Mr Rao and a statement was recorded from him on 05. 03. 2015. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a confused state of mind, that's why I have answered so. Q. 4. You are informed that all the partners severally and individually are responsible for each and every transaction relating to the business activities of the firm. What do you say. A, May be. As already mentioned, the managing partner is looking after the entire business transactions of the firm. Moreover, I have also replied that the figures in the papers impounded are estimated figures and they are not real transactions. It is also brought to the notice of the department that the firm has declared income on the turnovers found by the department during the course of survey mentioned above, At the time of survey, the department has suggested to offer the income on the suppressed turnover for the asst. year 2011-12 , Accordingly, Nakshatra Hotel estimated the net income at 3. 23% on the entire suppressed turnover ₹ 3,84 Cr. and offered additional Income of ₹ 11,04,500/ - for the asst. year 2011-12 alone to avoid further litigations. Hence the same maybe accepted. Q5. Once you have accepted the turnovers found by the department, the assessments will be completed taking the suppressed turno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the CIT(A) and the Ld. CIT(A) confirmed the addition made by the AO holding that the assessee had no explanation to offer anything with regard to the said difference in turnover and the silence of the assessee leads to presumption that the assessee has accepted the turnover which were reflected in the incriminating material found during the course of survey. 6. Against the order of CIT(A), the assessee filed appeal before this Tribunal. During the appeal hearing, the Ld. AR argued that the survey u/s 133A was conducted in the business premises of Mr Rao, one of the partners of the assessee firm on 17. 02. 2011. During the course of survey, certain incriminating material was found in the premises of Mr Rao which is said to be the turnover of the assessee, M/s Nakshtra Hotels. A statement u/s 133A was recorded from Mr Rao who has stated that he was not in a position to explain the contents of the incriminating material found at the time of survey. However, the assessee firm has admitted the additional income of ₹ 11,04,500/-, net profit of the aggregate turnover of 3 years amounting to ₹ 3. 84 corres@3. 25% on the suggestion of the survey team. The Ld. AR submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - for the A. Y. 2010-11. The statement was recorded from Mr. Rao on the date of survey and he stated that he was not in a position to explain the details. Subsequently, on 05. 03. 2015, one more statement was recorded and in the said statement also, Mr. Rao has denied that the turnover was related to the assessee firm. However, he has admitted that they have prepared the Profit Loss account by boosting the figures on estimation basis for the purpose of bank loan. Further, Mr. Rao during the course of survey has admitted the additional income of ₹ 11,04,500/- covering the deficiencies of survey. The said admission was relating to the net income estimated @3. 23% on the entire suppressed turnover of ₹ 3. 84 crores covering the three years. The AO did not make any enquiry with the then Managing Partner, Sri Sukhavasi Srinivasa Rao to find out the fact regarding the suppressed turnover. The AO also did not make any enquiry or verification of books of accounts relating to the assessee firm to ascertain whether the turnover really belonged to the assessee firm or Mr. Rao, one of the partners of the firm who is also carrying on the business independently. It was also observe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shatra Hotels it cannot be held that the turnover was pertaining to the Nakshatra Hotels unless such person confirms that the papers were related to the other person and other person also accepts the contents of the incriminating material. Otherwise it is to be presumed that the material belonged to the person who is surveyed. In this case, neither Mr. Rao nor the assessee has accepted that incriminating material was related to the assessee firm. In the absence of such enquiry and information, the papers cannot be held to be related to the assessee. Further, the assessee has admitted additional income of ₹ 11,04,500/- covering the survey deficiencies for three years which was accepted by the department and completed the assessment for the A. Y. 2011-12. For ready reference, we extract relevant part of the order of the assessment order of A. Y. 2011-12 dated 30. 03. 2014 which reads as under : basing on the impounded material and also the fact that one of the partners of M/s Nakshatra Constructions Sri Medepalli Rama Mohana Rao is also a partner in the assessee-firm. Thus, the assessee-firm in order to avoid tangible / intangible additions on account of Survey, has volun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orded were not made available at the time of appeal hearing. For a query from the Bench, the Ld. DR replied that there is no material available with regard to the details found at the time of survey. In the absence of any information from the revenue, we have no option except to believe that profit and loss account was found which was prepared for bank loan and net profit required to be brought to tax, but not the gross profit. Having admitted the additional income of ₹ 11,04,500/- for an aggregate turnover of ₹ 3. 84 crores on the suppressed turnover at 3. 23% which the AO has accepted, we find no reason to tax the gross profit once again. At the cost of repetition we observe that the AO failed to establish that the turnover found was pertaining to the assessee and did not bring any material to support the contention, Therefore we hold that estimation of income on the suppressed turnover as per the net profit at 3. 23% is reasonable and meets the ends of justice. The estimation of profit at 3. 23% each year is in addition to the income already admitted by the assessee for the A. Y. 2011-12. Accordingly, we direct the AO to compute the income estimating the net profit @ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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