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of <h1>Tribunal emphasizes proper income assessment and excludes unaccounted income from tax profit</h1> <h3>M/s Surabi Bullion Versus The Deputy Commissioner of Income Tax, Central – 1, Coimbatore</h3> M/s Surabi Bullion Versus The Deputy Commissioner of Income Tax, Central – 1, Coimbatore - TMI Issues involved:1. Revision of assessment order under Section 263 of the Income-tax Act, 1961.2. Discrepancy in assessing unaccounted income generated outside the books of account.3. Estimation of gross profit and treatment of losses in post-search period.Analysis:Issue 1: Revision of assessment order under Section 263 of the Income-tax Act, 1961:The case involved an appeal against the order of the Principal Commissioner of Income Tax, Central-2, Chennai, dated 15.07.2016 under Section 263 of the Income-tax Act, 1961. The Assessing Officer had made an addition of Rs. 11,39,930 based on unaccounted income found during a search operation. The Principal Commissioner found the Assessing Officer's order erroneous and prejudicial to the interests of Revenue, leading to a revision. The dispute centered around whether the Assessing Officer adequately considered all material documents and reconciliation statements filed by the assessee. The Tribunal concluded that the Assessing Officer failed to properly assess the income generated by the assessee from the business carried on as per the books of account, leading to a justified revision under Section 263.Issue 2: Discrepancy in assessing unaccounted income generated outside the books of account:The disagreement arose from the treatment of unaccounted income found during a search operation. The Assessing Officer assessed the difference between the cash found and the income returned by the assessee, without properly ascertaining the profit earned as per the books of account. The Tribunal noted that the unaccounted income admitted during the search operation should not be considered part of book profit for tax purposes. It was concluded that the Assessing Officer's failure to assess the income generated as per the books of account was an error prejudicial to Revenue, justifying the revision under Section 263.Issue 3: Estimation of gross profit and treatment of losses in post-search period:The dispute revolved around the estimation of gross profit and treatment of losses during the post-search period. The Assessing Officer estimated the gross profit without proper comparison, leading to a reduction in the gross profit declared by the assessee. The Tribunal found that since the books of account were not rejected and no defects were pointed out, the Assessing Officer's estimation of profit was unjustified. It was emphasized that estimation of profit should only occur when books of account are not maintained properly or rejected. Therefore, the Tribunal set aside the orders of the lower authorities and deleted the addition made by the Assessing Officer, allowing the appeal in I.T.A. No.2569/Chny/2017.In conclusion, the Tribunal dismissed the appeal in I.T.A. No.2489/Chny/2016 but allowed the appeal in I.T.A. No.2569/Chny/2017, emphasizing the importance of proper assessment and consideration of all relevant factors in determining taxable income.
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