2019 (7) TMI 1049

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....fects of the sales unsupported by day to day shop wise register of stock and sales, the assessing officer was justified in estimating the turnover on the basis of information received from the Excise Department by rejecting books of accounts under section 145 (3) of the Act, 1961 and taxing entire suppressed sale as income, or only the net profit part can be taxed as income." 3. The accounting year is 2010-2011. 4. The assessee is engaged in liquor business, as a licensee of the State. It is a State monopoly and licenses are issued from year to year either through auction or by extension as per Excise Policy mooted every year. During assessing year 2010-2011 the assessee declared gross receipts of Rs. 15.47 Crores yielding gross profi....

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....and face huge losses to sell the material as per the market trend by selling liquor at discounted rates and by relying on the decision in Commissioner of Income Tax vs. Balchand Ajit Kumar, 263 ITR 610 MP held that the entire suppressed/undisclosed sale of the assessee cannot be taxed as income, and only net profit can be taxed as income. Further by estimating 3% as the net profit affirmed by the addition of Rs. 44,51,623/- and deleted the balance addition of Rs. 2,68,50,342/-. 6. In further appeal before the Tribunal, the order passed by the Appellate Authority was affirmed with modification by applying net profit of 2.7% on the estimated sales on the findings: "12 From the above, it is amply clear that the ld. CIT (A) hasn&#39....

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.... profit of the assessee. It was observed by their Lordships: "This court while admitting the appeal framed the following substantial question of law : "Whether, on the facts and circumstances of the case, the assessee having not included the credit sales in the books of account and in the balancesheet, the Tribunal was justified assuming that the assessee followed different method of accounting for unrecorded sales, without any factual basis, and as such whether the order of the Tribunal does not suffer from perversity being against the settled principles of accountancy ?" On appreciating the rival submissions raised at the Bar, we have carefully perused the order passed by the Commissioner of Income-tax (Appeals)....

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..... The record goes to show that there is no finding nor any material has been referred about the suppression of investment in acquiring the goods which have been found subject of undisclosed sales." We are in respectful agreement with the aforesaid opinion inasmuch as the total sale cannot be regarded as the profit of the assessee. The net profit rate has to be adopted and once a net profit rate is adopted, it cannot be said that there is perversity of approach. Whether the rate is low or high, it would depend upon the facts of each case. In the present case net profit rate of five per cent. has been applied. We do not think it appropriate that the same requires to be enhanced. We are also inclined to think that it is high. In any c....