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TMI Blog2024 (1) TMI 1436X X X X Extracts X X X X X X X X Extracts X X X X ..... . On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 1,00,08,317/- made on account of undisclosed investment in 29315 boxes of goods made by the assessee on account of undisclosed sales detected during the course of search by Excise Department and the assessee has not mentioned the boxes in the production register as the same have been bogus/unexplained investment, without appreciating the facts of the case. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 14,24,533/- (being gross profit at 12.26% of unaccounted sales of RS.1,14,32,850/- (29315 boxes x Rs.390/-) embedded in the unaccounted investment in goods. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchase of raw material and subsequent manufacturing expenditure on unaccounted raw material for manufacturing of 29,315 boxes of vitrified tiles under Section 69C of the Act. While making the additions, the Assessing Officer made the following observations:- "12. Further on verification of the sale invoices submitted by the assessee during the course of assessment proceedings, it is seen that the assessee is offering 28% to 42% discount on MRP. Considering the average discount of 35%, the sale price is calculated at Rs. 390/- per box. However, the Central Excise Department has adopted the sale price of Rs. 330/- per box (55% of 600) for calculating the assessable value. This fact was brought to the notice of the A.R. of the assessee vide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing observations:- "5.2 On careful consideration, I find that the issue is squarely covered by the Hon'ble Gujarat High Court judgments and Rajkot ITAT decision (relied upon by the appellant) in appellant's favour. The Hon'ble Gujarat High Court in case of President Industries (258 ITR 654) held that In case of undisclosed sales, only profit margin should be taxed and in the absence of any specific finding of any investment routed in undisclosed sales, the undisclosed investment cannot be taxed only on assumption basis. Similar view was expressed by the Hon'ble Gujarat High Court in subsequent judgments in case of Gurubachhan Singh J. Juneja (302 ITR 63). Samir Synthetic Mill (324 ITR 410), Leo Formulations Pvt. Ltd. (36 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 by him on the ground of undisclosed investments. This ground of appeal is partly allowed. 5.3 The AR of the appellant has submitted during the course of hearing that the appellant has preferred an appeal against the order of the Central Excise Department and the said appeal is pending. In view of this, the AR of the appellant requested that whenever the matter is finalized by the Excise Department, its consequential effect should be given by the A.O., if required, in respect of addition sustained in this order. This contention of the appellant is reasonable and hence acceptable. I therefore direct the A.O. t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment 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 materials correctly in the books of account and had suppressed production. Accordingly, the Assessing Officer estimated unaccounted sales of assessee at 40% of the turnover. The Gujarat High Court held that the contention of the Revenue that entire excess consumption should be added to the income of the assessee could not be accepted as th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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