2000 (7) TMI 250 - AT - Income Tax

Tribunal limits Assessing Officer's inclusion of suppressed sales in income, directs specific adjustments.

Samrat Beer Bar. Versus Assistant Commissioner Of Income-Tax

The appeal was allowed in part, with the Tribunal ruling that the Assessing Officer was not justified in including suppressed food sales and gross profit ... Block Assessment Issues Involved:1. Inclusion of suppressed food sales and gross profit in the assessee's income.2. Estimation of suppressed sales and gross profit for the Beer Bar.3. General grounds for appeal.Summary:Issue 1: Inclusion of Suppressed Food Sales and Gross ProfitThe assessee, a partnership firm running a Beer Bar and Permit Room, was subject to a search u/s 132 on 27-6-1996. The Assessing Officer (AO) included suppressed food sales and gross profit in the assessee's income despite the assessee having a license only for a Beer Bar. The AO based his conclusion on a seized diary showing sales of food and beverages, and the proximity of Samrat Dining (another firm) to the Beer Bar. The Tribunal held that the AO was not justified in including the suppressed food sales and gross profit in the assessee's income, as the assessee was not permitted to sell food items and the sales related to Samrat Dining. The addition made on this account was deleted.Issue 2: Estimation of Suppressed Sales and Gross ProfitThe AO estimated suppressed sales of the Beer Bar at 70% of actual sales and applied a 40% gross profit rate. The Tribunal found no justification for the AO's presumption of continued suppression of sales throughout the block period, especially in the absence of material evidence. The Tribunal directed the AO to limit the suppressed sales to the period from 29-8-1988 to 25-8-1989 and apply a gross profit rate of 23% for AY 1989-90 and 27% for AY 1990-91, as requested by the assessee. The AO was instructed to work out the addition accordingly and adjust it against the declared undisclosed income of Rs. 2,00,000.Issue 3: General Grounds for AppealThe general ground for appeal was dismissed as it was found to be non-specific and called for no interference.Separate Judgment by Judicial Member:The Judicial Member disagreed with the limitation of suppressed sales to the period 28-9-1988 to 25-8-1989 and held that estimates could be made for the entire block period. However, the Third Member concurred with the Accountant Member, limiting the suppression period and adjusting the gross profit rates as directed. Conclusion:The appeal was allowed in part, with specific directions for recalculating the suppressed sales and gross profit, limiting the period of suppression, and adjusting against the declared undisclosed income.