2023 (8) TMI 867 - AT - Income Tax

Tribunal directs Assessing Officer to compute net profit ratio at 18% by deducting unrecorded expenses.

M/s. Sreedhars CCE Versus Asst. Commissioner of Income Tax, Central Circle, Vijayawada.

The Tribunal directed the Assessing Officer to compute the net profit ratio of unaccounted income at 18%, considering the necessity to deduct unrecorded ... Net profit ratio of unaccounted income - suppression of receipts - incomes accepted during the course of survey - Addition of entire unaccounted gross receipts without allowing deduction towards expenses in this regard - HELD THAT:- As in the assessee’s own case for the AY 2016-17 [2022 (9) TMI 865 - ITAT VISAKHAPATNAM] wherein under identical circumstances, the Tribunal held that the profit ratio of unaccounted income of the assessee shall be computed @ 18% , which is as accepted by the assessee during the survey proceedings. Thus we hereby direct the Ld. AO to compute the net profit ratio of unaccounted income of the assessee at the rate of 18%. Appeal of the assessee is allowed. Issues involved:The issues involved in the judgment are related to the appeal filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)-3, Visakhapatnam [Ld. CIT(A)] in DIN & Order No. ITBA/APL/S/250/2022-23/1043695051(1), dated 30/06/2022 arising out of the order passed u/s. 147 r.w.s 144 of the Act, dated 16/12/2019 for the AY 2015-16.Issue 1 - Grounds of Appeal:The assessee raised several grounds of appeal challenging the order passed u/s. 250 of the Act, confirming additions made by the Assessing Officer without allowing deduction towards expenses, failure to consider unrecorded expenses while confirming gross receipts liable for tax, and dismissing the appeal without proper consideration of case laws. The appellant sought deletion of the disputed addition in the interest of justice.Issue 2 - Computation of Net Profit Ratio:The Tribunal considered the arguments presented by both sides regarding the computation of the profit ratio of unaccounted income of the assessee. The Tribunal referred to a previous order in the assessee's own case for the AY 2016-17 where a profit ratio of 18% was accepted by the assessee during survey proceedings. The Tribunal found merit in the argument that certain unaccounted expenses must have been incurred by the assessee in earning undisclosed income, which was not accounted for. The Tribunal emphasized the importance of considering unrecorded expenses and the need to deduct them from the gross receipts to determine the total income. Citing judicial precedents, the Tribunal directed the Assessing Officer to compute the net profit ratio at 18%, as accepted by the assessee during survey proceedings.Conclusion:Respecting the decision in the assessee's own case, the Tribunal directed the Assessing Officer to compute the net profit ratio of unaccounted income at 18%, considering the necessity to deduct unrecorded expenses from gross receipts. As a result, the appeal of the assessee was allowed.