2018 (3) TMI 2037

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....mstances of the case, Ld. CIT (A) has erred in deleting the addition of Rs.5,00,000/- made by the Assessing Officer on account of undisclosed income from the commission, without appreciating the fact that the addition was made by the Assessing Officer on the basis of the amount surrendered by the assessee during the search operation. 3. That the order of Ld. CIT (A) deserves to be set aside and the assessment order passed by the Assessing Officer be restored." 3. The grounds taken by the assessee are reproduced below: "1. The Ld. Commissioner of Income Tax (Appeals) -III, Lucknow (herein after referred to as the Ld. CIT(A)'s) erred on facts and in law in confirming the addition of Rs. 16010810.00 under the head undisclosed income by applying the G.P. rate of 3.68% of the previous year instead of 1.91% of the current year, on undisclosed turnover of Rs. 1088767854/-. 2. In confirming the addition the Ld. CIT(A)'s failed to appreciate or rather chosen to completely ignore the fact that the applicant has already disclosed and amount of Rs. 23500000.00 as income on undisclosed turnover of Rs. 1088767854/- being 2.16% whereas the G.P. during the yea....

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.... income calculated by the Assessing Officer, the Assessing Officer allowed Rs.2.35 crore which the assessee had declared as unaccounted income in the income tax return and therefore, the difference of Rs. 1,96,42,721/- was added to the income of the assessee u/s 69 of the Act. 4.1 The Assessing Officer further observed that the assessee had made a surrender of Rs. 6,00,00,000/- as the undisclosed income from commission earned on the sale and purchase and which was admitted in the course of statement during search proceedings u/s 132(4) of the Act. The Assessing Officer observed that in the return of income the assessee had declared only Rs. 5.5 crore as commission income and remaining amount has been claimed as expenses to earn the undisclosed commission of Rs. 6,00,00,000/-. The Assessing Officer made the addition of balance amount of Rs. 50,00,000/- in view of no evidence for the expenses. 4.2 Aggrieved with the order the assessee filed appeal before learned CIT(A) and filed detailed submissions. Learned CIT(A) though upheld the gross profit rate of 3.7% applied by the Assessing Officer however, the Assessing Officer reduced the amount of undisclosed turnover by finding dif....

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....was quite reasonable and should have been allowed. 6. Learned D. R., on the other hand, submitted that the arguments of Learned A. R. that the current year's gross profit rate should have been applied to the unaccounted turnover should not be accepted as if the same gross profit rate is applied to disclosed turnover and undisclosed turnover there will not be any deterrent to any assessee who is indulging in unaccounted transaction. Learned D. R. stated that in unaccounted turnover the assessee also saves heavy amount on account of non payment of taxes and therefore, the application of higher gross profit rate was necessary. 6.1 As regards the claim of expenses of Rs. 50,00,000/-, Learned D. R. stated that the assessee could not produce any evidence to substantiate his claim and moreover during search proceedings he had surrendered Rs. 6,00,00,000/- as commission income and therefore, the claim of Rs. 50,00,000/- as expenses is an afterthought and authorities below have rightly not allowed the claim. 6.2 Arguing on the Departmental appeal, Learned D. R. submitted that learned CIT(A) has wrongly deleted the addition of Rs. 36,31,910/- by reducing the amount of undisclosed tu....

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....sessee not to make unaccounted transactions in future and in view of justice to both parties, we deem it appropriate that average of gross profit rate of 3.7% and 1.91% should have been applied to the unaccounted turnover. The average gross profit rate of these two years comes out at 2.8%. Therefore, the Assessing Officer is directed to apply gross profit rate of 2.8% on the unaccounted turnover as calculated by learned CIT(A) which after relief given by learned CIT(A) comes out at Rs. 1,08,87,67,854/-. Out of the gross profit thus arrived the assessee will be allowed deduction on account of expenses to the extent of Rs. 7,73,600/- which learned CIT(A) has also given and out of such net profit the profit declared by the assessee to the tune of Rs. 2.35 crore will be reduced and remaining amount is liable to be taxed in the hands of the assessee. In view of the above ground No. 1,2,3 & 4 of the appeal of the assessee are partly allowed. 7.1 As regards ground No. 5 and 6, we find that assessee had declared a commission income of Rs. 6,00,00,000/- and now in the return of income it claimed Rs. 50,00,000/- as expenses to earn that income which has not been substantiated. Learned CIT....