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TMI Blog2020 (7) TMI 366X X X X Extracts X X X X X X X X Extracts X X X X ..... ate General of Central Excise Intelligence amounts to ₹ 2,76,07,339/- during the assessment year 2010-11. The average sales per month amounts to ₹ 23,00,611/-. The average GP on sales as disclosed in the returns is 3.90% which amounts to ₹ 89,724/-. The average purchase per month amounts to ₹ 22,10,887/-. The undisclosed investment was, therefore, estimated at ₹ 22,10,887/- (₹ 23,00,611/- -89,724/-) on undisclosed sales of ₹ 2,76,07,339/-. CIT(A) also computed the profit on undisclosed sales of ₹ 2,76,07,339/- at the rate of 3.90% at ₹ 10,76,686/- [3.90% of ₹ 2,76,07,339]. Therefore, addition was restricted to ₹ 32,87,573/- (₹ 22,10,887/- plus ₹ 10,76,686/-) instead of ₹ 2,76,07,339/- as undisclosed income on undisclosed investment in sales and profit on undisclosed sales. The conclusions arrived at by the CIT(A) are, therefore, correct and admit no interference by us. We, approve and confirm the order of the CIT(A). Appeal of the revenue is dismissed. - ITA No.482/Kol/2018 - - - Dated:- 12-6-2020 - Shri S.S. Godara, JM And Dr. A.L. Saini, AM For the Appellant : Shri Dhrubajyoti Roy, JCI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details.In response to the above query, the A/R of the assessee company submitted as under: no details of purchase were found by the Excise Department during course of survey made by them. The details of undisclosed sales was only found and on the basis of the undisclosed sales we have disclose the estimated profit on such sales. Thus, we have also not claimed any deduction in respect of unaccounted sales on account of undisclosed purchase. Out of common sense and based on the business of the assessee it is presumed that the assessee has earned some profit on such sales and as such average gross profit rate of 3.90% over a period of last three years was applied by the assessee. Hence there is no need for furnishing cash flow statement and source of purchase as there is no need to look into the provisions of the section 40A(3) of the Income Tax Act, 1961. The AO has gone through the above submission of the assessee company and noticed that the assessee has failed to furnish the sources of purchase by failing to provide the rotation of cash flow as asked for. When a deduction by way of purchase is claimed it should be ascertained whether the payment was genuine and wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant had undisclosed sales amounting to ₹ 2,76,07,339/- and also submitted that gross profit represented the income on undisclosed sales. The same submission was made during the appellate stage. Therefore, the admission of the appellant during the Assessment and also appellate proceedings, fortifies the Assessing Officer has reason to believe that income chargeable to tax had escaped assessment. The notice issued u/s 148 was as per law. A minor procedure lapse on the part of the AO cannot vitiate the entire assessment proceedings keeping in view the fact that discrepancies were found after raid on the appellant's premises by the Directorate General of Central Excise Intelligence. The Bombay High Court in the Case of M/s Amaya Infrastructure Pvt Ltd vs I.T.O. [WP no. 787 of 2006] has held In this case, we find that the petitioners have filed detailed information called for by the Assessing Officer under Section 142(1) and 143(2) of the Act and thus participated in the assessment proceedings. This having been done, it is not open for the petitioners to now contend that this Court should exercise its extraordinary jurisdiction and prohibit the Authorities f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en sold have been made by the assessee and that has also not been disclosed. However, in the case under appeal, there is no iota of doubt that purchases have been suppressed. The A/R of the appellant in his written submission page 3 dated 25.09.2017 has admitted that it was further submitted that the appellant had not shown the corresponding purchases in its books of account . In the assessment order also, the appellant in his written submission dated 09.10.2015 in response to show cause dated03.09.2015 had submitted that Therefore, it is evident that entire sale should not be treated as undisclosed income as the purchases was also unaccounted. In such circumstances, the gross profit earned out of such unaccounted sales can be treated as unaccounted income. We would like to mention that average gross profit of last three years should be taken into account for calculation of concealed income . As mentioned aforesaid, there is no iota of doubt asregards undisclosed purchases. The appellant has admitted making undisclosed sales out of undisclosed purchase. In light of the admission of the appellant, GP alone cannot constitute undisclosed income of the appellant. The A/R of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s sufficient, has to be made good with material and proof by the assessee. The assessee had to explain that purchases recorded in the books were sufficient after adjustment of the recorded sales. In cases of unaccounted sales and purchases all documents may not be available and certain amount of guess work is always required as noticed earlier but a realistic and common sense approach is required. To say that there was no evidence to show that the assessee had made unexplained investment would be to write off and erase the earlier finding of the tribunal that the assessee had made unaccounted sales of ₹ 9.73 crores. Unrecorded purchases as mentioned in the seized document were more than ₹ 4.50 crores. We also do not agree with the finding recorded by the tribunal that proof of unaccounted purchases did not prima facie indicate or show that unaccounted investment was made, as there was other Apparent evidence to the contrary. Onus, in such cases, is on the assessee to show that unaccounted investment was made out of accounted stock. There cannot be any assumption or presumption that unaccounted sales must be from accounted purchases. Unaccounted sales may result and can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. Counsel for the assessee has relied on the order of ld CIT(A). 7. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials available on record. We note that the assessee as per his own admission had made the undisclosed sales from undisclosed purchases. In business, there is rotation of purchase and sales. The initial investment in the purchase gets rotated throughout the year in the form of purchase and sales resulting in the total turnover. The initial investment in the undisclosed sales would constitute undisclosed investment in undisclosed sales. The A/R of the assessee during appellate proceedings could not provide any details of this undisclosed investment. Therefore, ld CIT(A) in the absence of any material on record, the entire undisclosed investment in undisclosed sales had been estimated. The ld CIT(A) noticed that assessee`s undisclosed sales as detected during search and seizure operations carried out by the Officers of the Directorate General of Centra ..... X X X X Extracts X X X X X X X X Extracts X X X X
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