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TMI Blog2024 (7) TMI 791X X X X Extracts X X X X X X X X Extracts X X X X ..... ndisclosed investment being the source of purchases recorded for subsequent sales. No substantial question of law arises from the impugned judgment and order of the Tribunal. - HONOURABLE MR. JUSTICE BHARGAV D. KARIA AND HONOURABLE MR. JUSTICE NIRAL R. MEHTA Appearance: For the Appellant(s) No. 1 : Karan G Sanghani (7945). For the Opponent(s) No. 1 : None ORAL ORDER (PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA) 1. By this Tax Appeal under Section 260A of the Income-Tax Act, 1961 (for short the Act ), the appellant revenue has proposed the following questions of law arising from the judgment and order dated 19.1.2024 passed by the Income-Tax Appellate Tribunal, Rajkot (for short the Tribunal ) in ITA No. 94/Rjt/2017 for Assessment Year 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 12.46% as per the return of income filed by the assessee, made addition of Rs. 12,05,375/- as an income of the assessee. 4. Apart from the above, the Assessing Officer made further addition of Rs. 84,68,575/- being unaccounted investment in purchase of raw-material and subsequent manufacturing expenditure on unaccounted raw-material for manufacturing of 29315 boxes of vitrified tiles under Section 69C of the Act. 5. Being aggrieved, the assessee preferred Appeal before the CIT(A). The CIT(A), however, confirmed the addition of gross profit @ 12.46%, but deleted the addition made under Section 69C of the Act, observing as under : 5.2 On careful consideration, I find that the issue is squarely covered by the Hon'ble Gujarat High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search by the Excise Department or in any subsequent investigations. The undisclosed investment has only been assumed as the source of purchases required for subsequent sales. As already discussed such assumption in the absence of any specific finding has been disapproved by the Hon'ble Gujarat High Court and Hon'ble Rajkot ITAT in the foregoing judgments. In view of these binding judgments, I hold that the addition in the appellant's case should be restricted only to the extent of gross profit and no addition can be made for mere assumption of undisclosed investment. I therefore, direct the A.O. to restrict the addition to the extent of gross profit of Rs. 14,24,533/- and delete the balance addition of Rs. 1,00,08,317/- made b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d sales should be taxed. In our considered view, various High Courts including the Gujarat High Court in the case of President Industries 258 ITR 654 has held that in case of undisclosed sales only profit margin should be taxed and in absence of any specific findings of any investment routed in undisclosed sales, the undisclosed investment cannot be taxed on assessment basis. In the case of Manmohan Sadani 304 ITR 52 (M.P.), the High Court held that total sales cannot be recorded as profit of the assessee and it is only net profit rate which has to be adopted in such cases. In the case of CIT vs. Leo Formulations Pvt. Ltd. 48 taxmann.com 328, the Assessing Officer observed that the assessee had not recorded consumption of different raw mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al on record to show that there was any unexplained investment made by the assessee, which was reflected by alleged unaccounted sales, finding of Tribunal that only gross profit on said amount could not be brought to tax, did not call for any interference. Now coming to the instant facts, in our view, Ld. CIT(A) has correctly observed that Assessing Officer has not recorded any finding of any undisclosed investment found as a result of search by Excise Department. The undisclosed investments has only been assumed as the source of purchases recorded for subsequent sales. Accordingly, in view of the aforesaid discussions, we are of the considered view that Ld. CIT(A) has correctly held that looking into the instant facts, the addition should ..... X X X X Extracts X X X X X X X X Extracts X X X X
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