2026 (2) TMI 151 - AT - Income Tax

Profit on unaccounted sales, cash and jewellery seized in search: discrepancies reconciled; limited addition ordered.

Discrepancy between POS gross billing and regular books arose from inclusion of GST in POS figures while the assessee records sales net of GST; stock ... Profit on Unaccounted Sales - addition was made u/s 28 - allegation of Ld. AO primarily stem from the fact that the sales figures as reported by the assessee in regular Tally Data and the sales figures as reported in POS Cash / Restaurant counter & bills books found during search proceedings differ in value - HELD THAT:- It is quite logical that POS counter sales would show gross sales inclusive of GST component since this data would reflect gross billing as done to assessee’s customers. As against this, the assessee follows accounting policy of reflecting sales net of GST component in regular books and the two data would certainly vary to the extent of GST component. It is also logical that mere stock-transfer would not constitute sales for the assessee and the same could not lead to a conclusion of unrecorded sales in the hands of the assessee. Considering totality of facts and circumstances of the case, we would hold that the assessee had substantially discharged its onus to reconcile the impugned differences. On these facts, we direct Ld. AO to restrict impugned addition to lumpsum amount of Rs. 5 Lacs as ‘business income’ to plug possible leakage of revenue. The remaining addition stands deleted. The corresponding ground stand partly allowed. Cash difference as computed by AO books were updated and cash-in-hand ledger was furnished by the assessee in support of its cash-in-hand. By furnishing the same, the assessee, in our considered opinion, had duly discharged the onus of proving the quantum of cash as found during the search. The same is in tune with the statement made by the assessee at the time of search. No specific defect has been pointed out by Ld. AO in the books of accounts of the three concerns and the claim has been rejected without any logic. Since the assessee has duly substantiated the cash with its regular books of accounts, the impugned addition as made in the hands of the assessee as well as his wife Smt. Pooja Aggarwal is not sustainable. Addition of jewellery as found during search - Quantum of jewellery as found during search stood explained substantially. The mere difference of 10.960 Grams could only be considered as negligible difference for which no addition is warranted. Therefore, in our considered opinion, the impugned addition as made by Ld. AO in the hands of the assessee as well as in the hands of Smt. Pooja Aggarwal is not sustainable. Issues: (i) Whether the addition under Section 28 for alleged unrecorded sales (difference between POS and Tally data) is sustainable; (ii) Whether the addition under Section 69A read with Section 115BBE in respect of cash found/seized is sustainable; (iii) Whether the addition under Section 69A read with Section 115BBE in respect of jewellery/seized valuables is sustainable.Issue (i): Whether alleged unrecorded sales as computed by comparing POS records with Tally books justify an addition under Section 28.Analysis: The tribunal examined the reconciliation submitted showing adjustments for double-counted POS restaurant sales, GST component, stock transfers to sister concerns entered at cost, difference between cost and MRP on transfers, and residual difference. The tribunal found that the assessee furnished ledger extracts and reconciliation quantifying POS duplication, GST, stock transfers and cost-MRP differences and that the assessing authority did not point to any specific defect in those reconciliations or independently rebut the documents.Conclusion: Partly allowed. The assessing officer's addition is restricted to a lumpsum amount of Rs.5,00,000 treated as business income; the remaining addition is deleted (decision in favour of the assessee on the bulk of the claim).Issue (ii): Whether the cash found/seized and the computed cash discrepancy justify addition under Section 69A read with Section 115BBE.Analysis: The tribunal considered the recorded statement attributing cash to cash sales and the subsequently furnished updated cash books showing cash-in-hand for the three concerns. No cogent defect was demonstrated by the assessing authority in the updated cash books and the books were consistent with the statement that books were not updated at search time.Conclusion: Allowed in favour of the assessee. The addition in respect of cash discrepancy is deleted.Issue (iii): Whether jewellery and valuables found/seized merit addition under Section 69A read with Section 115BBE.Analysis: The tribunal reviewed documentary evidence produced including purchase bills, gift deeds, challans/approval notes purporting to show jewellery received on approval and inherited/ancestral items, and applied CBDT Instruction No.1916 to assess treatment. The tribunal found substantial explanation and documents for the jewellery and that the assessing authority failed to carry out independent enquiries or produce cogent evidence to displace the documents; the balance discrepancy was negligible.Conclusion: Allowed in favour of the assessee. The additions in respect of jewellery are deleted.Final Conclusion: The appeals are partly allowed overall: the unrecorded sales addition is curtailed to a nominal lumpsum amount while additions relating to cash and jewellery are deleted; the assessing authority is directed to give effect to these findings.Ratio Decidendi: Where an assessee furnishes documentary reconciliations and supporting books that materially explain discrepancies revealed by search, the assessing authority must carry out independent enquiries or produce cogent evidence to rebut those explanations before making additions; absent such independent rebuttal, additions are not sustainable and only a limited lump-sum may be imposed to safeguard revenue if a residual risk of leakage exists.