2015 (10) TMI 1885

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.... "(i) Ld. CIT (A) has erred in taking only gross profit on unaccounted turnover of Rs. 25, 08,740/- without considering the fact that the assessee in order to make such turnover would require investment in stocks. Ld. CIT(A) should have made an addition of fixed % age of turnover as unaccounted investment in stock. (ii) Ld. CIT (A) erred in permitting telescopic view to the extent of Rs. 4,86,007/- invested in purchase of fixed asset out of the unaccounted profits without considering that the assessee need to demonstrate that on date of purchase of fixed asset (02-08-2006) sufficient amount of profit was earned from unaccounted turnover to make investment in the aforesaid fixed asset." 2. Apropos these grounds, we have heard argument....

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....the AO made addition without considering the fact that the assessee would require substantial investment in stock for making such alleged turnover and the CIT(A) was right in restricting the addition to the fixed percentage of turnover as unaccounted investment in stock. Ld. Counsel also pointed out that on the date of purchase of fixed assets i.e. 2.8.2006, the assessee had earned sufficient amount of income/profit from unaccounted turnover to make further investment in provision of machine/fixed asset, therefore, the CIT(A) was quite reasonable and justified in permitting telescopic view to the extent of Rs. 4,86,000 in this regard. Ld. Counsel strenuously pointed out that on taking a telescopic view, no further and separate addition was ....

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....ds the alleged unaccounted investment in Plant and machinery, it was submitted that the same could only have been expended out of the undisclosed income determined by the Ld AO. 5. It is seen from para 5 of the impugned assessment order that several documents were found and seized which were held to be containing details of sale transaction outside the books of accounts. These unaccounted entries have been discussed at length by the Ld. AO before adding back the said amounts and after having decoded the entries. 6. I have carefully considered the submission of the assessee and the impugned assessment order. Several documents were found in the course of search, and as stated by the Ld. AO the entries were decoded to arrive at the corre....

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.... confirmed. However, on taking a telescopic view, no further and separate addition is made on this account. In the result, the addition made by the Ld. AO of Rs. 29,94,740/- is restricted to Rs. 727,534." 5. In view of above, we observe that the assessee explained that the impugned addition of Rs. 29,94,740 included a sum of Rs. 4,86,000 spent towards plant and machinery/fixed asset and Rs. 21,958 as difference in reconciliation of stock and trade. The assessee clarified these facts by way of furnishing a chart before the authorities below and it was also submitted that at the most, the impugned amount of alleged unaccounted sale may be considered as sales on which GP rate could be applied on the transactions not reflected in the books. ....