2021 (9) TMI 530 - AT - Income Tax

Tribunal affirms CIT(A)'s income estimation decision under IT Act, emphasizing rebuttable presumptions.

The Tribunal upheld the CIT(A)'s decision to estimate income at 5% of the turnover, emphasizing the rebuttable nature of presumptions under section 292C ... Undisclosed turnover - Estimation of income @ 5% being sales turnover of the assessee - presumption u/s. 292C - according to the ld. DR, the entire turnover has to be considered as unexplained investment u/s. 69B - HELD THAT:- As the entire turnover mentioned in the pocket diaries in its entirety cannot be considered as undisclosed income of the assessee and turnover includes purchase cost, labour cost, other costs and gross profit and he estimated only the net profit of that turnover @ 5% and directed the AO accordingly - even after applying the presumptions u/s. 292C of the Act to the facts of the present case, there was no adequate material to conclude that the transaction recorded in the seized documents are total undisclosed income of assessee which remained unexplained. The other aspect of the matter is that presumptions u/s. 292C are rebuttable presumptions and they do not lead to conclusive evidence. The assessee has right to rebut the presumption. In the present case, since the assessee has not rebutted the presumption, CIT(A) has given a direction to estimate the income on the turnover @ 5% as income of the assessee. In view of the inadequate material to suggest that the entire turnover is income of the assessee, to be reasonable and fair, the CIT(A) estimated income @ 5% of the turnover. We do not find any infirmity in the findings of the CIT(A) on this issue. As the entire transaction recorded in the seized material cannot be considered as income of assessee u/s 69B. Therefore, we are inclined to confirm the order of CIT(Appeals) on estimation of income @ 5% of the turnover. In view of the above discussion, we dismiss the grounds of the revenue. Issues Involved:1. Interpretation of provisions of section 292C of IT Act regarding undisclosed investments.2. Assessment of undisclosed income based on seized documents and turnover estimation.3. Application of presumptions under section 292C of the Act in determining undisclosed income.4. Rebuttable nature of presumptions under section 292C and its impact on assessment.5. Comparison with previous judgments and their applicability to the current case.Issue 1: Interpretation of provisions of section 292C of IT Act regarding undisclosed investments:The appeal involved a dispute regarding the application of provisions of section 292C of the IT Act to the evidence presented. The contention raised was that the unaccounted purchases should be considered as investments in stock in trade under Sec. 69B. The order of the CIT(A) was challenged on these grounds.Issue 2: Assessment of undisclosed income based on seized documents and turnover estimation:The Assessing Officer (AO) made an addition to the income of the assessee based on undisclosed investments. The CIT(A) disagreed with the AO's approach and directed the estimation of income at 5% of the turnover. The revenue appealed against this decision, arguing that the entire turnover should be considered as unexplained investment under Sec. 69B.Issue 3: Application of presumptions under section 292C of the Act in determining undisclosed income:The contention was raised regarding the application of presumptions under section 292C of the Act. The argument was that the seized documents should be considered as belonging to the assessee, and their contents should be presumed as true. The revenue claimed that the entire turnover should be treated as unexplained investment under Sec. 69B.Issue 4: Rebuttable nature of presumptions under section 292C and its impact on assessment:The Tribunal analyzed the presumptions under section 292C, emphasizing that they are rebuttable and do not lead to conclusive evidence. The CIT(A) estimated income at 5% of the turnover, considering the inadequacy of material to support the entire turnover as income. The Tribunal upheld this decision, highlighting the assessee's right to rebut the presumptions.Issue 5: Comparison with previous judgments and their applicability to the current case:The Tribunal referred to a previous order involving a similar issue, where undisclosed deposits were considered as business receipts. Based on this precedent, the Tribunal confirmed the CIT(A)'s decision to estimate income at 5% of the turnover. The Tribunal also cited another judgment regarding Supari business, where a profit rate of 2% was adopted in cases of unaccounted sales.This detailed analysis provides insights into the legal judgment, covering the interpretation of relevant provisions, assessment methodology, application of presumptions, rebuttable nature of presumptions, and comparison with prior judgments to support the final decision.