2014 (2) TMI 785 - AT - Income Tax

Appeals partially allowed, focus on accurate income disclosure & examination of unaccounted sales.

The Tribunal partly allowed the appeals of both the Assessee and the Revenue, reducing the addition made by the Assessing Officer and CIT(A). The judgment ... Addition made on unaccounted income – Survey u/s 133A of the Act – Estimation of net profits - Held that:- A survey was conducted at the premises of Assessee and during the course of survey certain diaries were found which contained entries of certain amounts against different dates aggregating to Rs. 21,03,466 - Assessee submitted that the reflected cash sales which were not recorded in the books of accounts and offered Rs. 50 lac as undisclosed income but however in the return of income, Assessee offered only Rs. 15 lacs - CIT(A) worked out sales for the entire year, capital requirement and thereafter applying the net profit rate @ 3% restricted the addition to Rs. 11 lacs as against Rs. 35 lacs made by A.O - Revenue has pointed out that CIT(A) has worked out the sales on the basis of entries found in diary and considering the number of days to be 43 instead of 18 days and therefore the addition has been worked out to a lower figure - Assessee on the other hand has submitted that CIT(A) has proceeded on the basis of presumption but at the same time, the Assessee has also not brought any material on record to controvert the findings of CIT(A) – thus, the addition is restricted to Rs. 5 lac as against the addition of Rs. 35 lac made by A.O. and which was sustained at Rs. 11 lac by CIT(A) – Decided partly in favour of Revenue. Issues:1. Discrepancy in disclosed income during survey and in the return of income.2. Estimation of undisclosed turnover, net profit, and seed capital.3. Unaccounted sales and gross profit calculations.Issue 1: Discrepancy in disclosed income during survey and in the return of income:The case involved appeals by the Assessee and the Revenue against the order of CIT(A)-I, Surat for A.Y. 2009-10. The Assessee admitted to undisclosed income during a survey, but disclosed a lower amount in the return of income. The Revenue raised concerns about the deletion of the addition made on account of unaccounted income and deduction against the disclosed income. The CIT(A) granted partial relief to the Assessee, leading to appeals by both parties.Issue 2: Estimation of undisclosed turnover, net profit, and seed capital:The Assessee's turnover, gross profit, and expenses were scrutinized. The impounded diaries revealed unaccounted sales, leading to an estimation of undisclosed turnover and seed capital. The CIT(A) calculated the unaccounted turnover for the entire year based on the diary entries and other factors, resulting in an estimation of unaccounted income. The addition was reduced by CIT(A based on these calculations.Issue 3: Unaccounted sales and gross profit calculations:The diaries found during the survey contained entries of unaccounted cash sales. The Assessee offered a higher undisclosed income during the survey than in the return of income. CIT(A) analyzed the entries in the diaries, calculated sales for the entire year, and estimated net profit and seed capital. The Revenue and Assessee presented arguments regarding the calculation methodology. Ultimately, the Tribunal restricted the addition to a lower amount than initially determined by the Assessing Officer and upheld by CIT(A).In conclusion, the Tribunal partly allowed the appeals of both the Assessee and the Revenue, reducing the addition made by the Assessing Officer and CIT(A. The judgment emphasized the importance of accurate disclosure of income, proper estimation of turnover and profits, and thorough examination of unaccounted sales and expenses.