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TMI Blog2024 (9) TMI 1444X X X X Extracts X X X X X X X X Extracts X X X X ..... he circumstances. Unexplained expenditure - Assessee argued once the AO has rejected books of accounts and estimated profits on turnover, the same shall take care of the expenses incurred for earning such profits and any addition made with respect to such expenses would tantamount to double addition - HELD THAT:- The expenditure on account of unrecorded cash coupons works out as detailed at table above is treated as unexplained expenditure and assessed u/s 69C of the Act and the same is taxed at maximum marginal rate of 60% u/s 115BEE - There is no scope for estimation of unexplained expenditure because the same is a deeming provision and actual incurring of expenditure is must. The addition itself is fragile and is based on pure surmise and conjunctures. The basic invocation of section 69C is uncalled for merely on estimates. The learned CIT(A) has appropriately decided which needs no interference at our end. Thus, though on a different line of logical line of thinking, we uphold the order passed by the CIT(A) by dismissing the ground no.4. Addition based on 4% net profit estimated on the turnover - We have heard the rival arguments, perused the material available on record and go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, the Ld. CIT(A) has erred in considering the 5% NP as reasonable without appreciating the fact that the 5% NP was shown by the assessee in his regular books after claiming all the expenses, hence, NP from unaccounted sale should be more that the normal NP and therefore, AO has adopted 8% NP very leniently and reasonably. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred also in holding that the additional income declared by the assessee of Rs. 75 lakhs covers NP at the rate of 5% without appreciating the fact that the additional income offered was in general nature and the findings of the AO to arrive at the NP at the rate of 8% is based on the incriminating material seized during the search. 4. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting addition of Rs. 78,93,431/- on account of estimated unexplained expenditure holding that one has been estimated by the AO rejecting the books of accounts the source of expenditure relating to such turnover on which income have been offered stands explain and addition made on account of coupons by treating the same as unexplained expenditure tantamount to double additions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of 8% of the estimated unaccounted turnover; (ii) Rs. 78,93,431/- being estimated unrecorded expenditure and (iii) Rs. 3,69,516/-being profit estimated at the rate of 8% on the difference in stock as per books vis- -vis physical verification. 3. The assessee being aggrieved by the said order has preferred an appeal before your honor challenging the legality as well as the facts on the basis of which the aforestated additions have been made. The assessee has dealt with the aforementioned additions on grounds as under: Grounds of Appeal a. That the Order passed under sec 143(3) of the I.T. Act, 1961 by the Ld. A.O. is unjustified and bad in law. b. That the Ld. A.O. erred in making addition of Rs. 71,41,345/- at the hands of the assessee on account of dumb documents found in the premises. C. That the Ld. A.O. erred in making an addition of Rs. 78,93,431/- on account of unexplained expenditure of coupons found, as the said coupons do not impact the determination of income of the assessee because they are reimbursed by the manufacturers. d. That the Ld. A.O. erred in making an addition of Rs. 3,69,516/- on account of difference in stock physically found in the premises and that rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19) at para 13, wherein it was held/concluded as under Normally, to estimate the profit of any assessee, the previous years' profit ratios are used and not the subsequent years' profit ratio. However, the subsequent years' profit ratios as submitted by the assessee provide us a bird eye and rough idea that what is the earning trend in the assessee s business. iii. Hon ble ITAT Cuttak in the case of Bhambra Service centre vs ITO 2018 53 CCH 414 at para 36, wherein it was held/concluded as under . .the Assessing Officer cannot make a wild guess but has to estimate the income of the assessee on the basis of past accepted results . iv. Hon ble ITAT Agra in the case of DCIT vs Vankhandeshwar construction Co., (2017) 50 CCH 0209 (ITAT Agra) 279/Agra/2014 at para 7 8, wherein it was held/concluded as under . .net profit was to be estimated by applying rate of profit in accordance with rates, applied in case of assessee for earlier years, thus estimation of income arrived at not justified .. 5. Apart from the above, the learned Counsel for the assessee made elaborate submissions which are reproduced vide Para 11/Page 6 to Para 19/Page 17, in the order passed by the learned CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffer stands explain. The addition made on account of coupons why treating the same as unexplained expenditure tantamount to double additions of the same amount and accordingly the addition of Rs. 78,93,431/- is hereby deleted. Accordingly, the said ground is allowed. Further in ground no. 4 the appellant has raised the contention of addition of Rs. 3, 69,516 / - on account of difference in stock physically found in the premises and that recorded in the books. I am of the view that since the AO has extrapolated the sales on the basis of seized material and estimated the NP the above addition is unjustified and hence it is deleted. Further the appellant has offered additional income of Rs. 1,00,00,000/- in respect of A.Ys. 2018-19, 2019-20 2020-21 and 93,00,000/- for A.Y. 2020-21, 2019-20 and 2014-15 has been offered in case of Shri Ajay Kamnani. Hence considering the above facts, the appeals are disposed of as above. 5. Result: In the result, the appeals filed by the appellant for A.Y. 2020-21 are treated as allowed . 6. The Revenue being aggrieved by the aforesaid order of the learned CIT(A), is in appeal before the Tribunal. 7. Before us, the learned Departmental Representative ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es would tantamount to double addition. He relied upon the order dated 10/03/2021, passed by the Co ordinate Bench of the Tribunal, Chennai Bench, in ACIT v/s S. Moorthy, ITA no.3091/CHNY/2019 (wherein the Hon ble J.M. is a part of Corum). The relevant operative portion of the decision of the Tribunal is reproduced below: 8. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. It is an admitted fact that the AO has rejected books of account u/s. 145(3) of the Act and estimated profit from the business by adopting 12.5% net profit on gross receipts. It is also an admitted fact that once books of account are rejected u/s. 145(3) of the Act, no further additions can be made by relying upon same books of account either in respect of cash credits u/s. 68 of the Act or unexplained commission expenses u/s. 69C of the Act, because in order to invoke provisions of section 68 of the Act, it is essential that credit should be from the books of account of the assessee maintained for that year. Once, the books of account maintained by the assessee is treated as no longer in existence by rejecting those books u/s. 145(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile going through the order passed by the Assessing Officer, we find that Assessing Officer has rejected the books of account and estimated profit on sales from the business. At the rate of 8% of the turnover, the learned CIT(A) deleted the addition stating the reason that once the books of accounts are rejected and the profit percentage has been estimated, no separate addition can be made towards unexplained expenditure under section 69C of the Act. Further, it is manifest that such expenditure has been estimated by a nebulous mathematical calculation as below, culled out from Para 10.2 of the assessment order. The submission furnished by the assessee has been carefully perused and considered. However, the same is not completely acceptable. It cannot be ruled out that the cash coupons are exchanged by the retailers/ customers with the goods sold by the assessee and business concerns of Kamnani Group. On the other hand the contention of the assessee that the assessee and the business concerns of Kamnani group are not paying cash for scratched coupon with denomination displayed in the coupons can't be accepted in toto. As the books of accounts of the assessee already rejected as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Profession and taxes thereon have been duly paid at the time of filing return of income. 18. We have heard the rival arguments, perused the material available on record and gone through the orders of the authorities below. We find that the Learned CIT(A) has recorded that the appellant has offered ₹ 75 lakh, as additional income, which duly covers the profit @ 4% on the total turnover. Thus, we find that the Learned CIT(A) has correctly considered the additional income and our interference is not called for. 19. The ground no.6, is concerned, the addition of ₹ 3,69,516, on account of profit estimated @ 8% on the difference in the stock physically found vis- -vis as appearing in books of accounts. 20. The learned Departmental Representative heavily relied on the assessment order passed. 21. On the other hand, the learned A.R. brought to our attention that once the assessing officer has rejected books of accounts and estimated profits on turnover, no addition on account of a shortage of stock is required. The profit estimated on the turnover subsumes the shortage in the stock physically found as compared to stock as appearing in the books. Any addition made with respect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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