TaxTMI 
TaxTMI 
2024 (9) TMI 1444
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....counted cash sales which has been discussed in assessment order in length and this unaccounted sale was not the part of the regular books of accounts 2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in considering the 5% NP as reasonable without appreciating the fact that the 5% NP was shown by the assessee in his regular books after claiming all the expenses, hence, NP from unaccounted sale should be more that the normal NP and therefore, AO has adopted 8% NP very leniently and reasonably. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred also in holding that the additional income declared by the assessee of Rs. 75 lakhs covers NP at the rate of 5% without appreciating the fact that the additional income offered was in general nature and the findings of the AO to arrive at the NP at the rate of 8% is based on the incriminating material seized during the search. 4. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting addition of Rs. 78,93,431/- on account of estimated unexplained expenditure holding that one has been estimated by the AO rejecting the books of acc....
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....etermining total income at Rs. 2,87,36,480/- vide order dated 27/09/2021. 2. During the concerned A.Y., the Ld A.O. has made the additions to the returned income of the assessee on three counts i.e. (i) Rs. 71,54,956/-being profits estimated at the rate of 8% of the estimated unaccounted turnover; (ii) Rs. 78,93,431/- being estimated unrecorded expenditure and (iii) Rs. 3,69,516/-being profit estimated at the rate of 8% on the difference in stock as per books vis-à-vis physical verification. 3. The assessee being aggrieved by the said order has preferred an appeal before your honor challenging the legality as well as the facts on the basis of which the aforestated additions have been made. The assessee has dealt with the aforementioned additions on grounds as under: * Grounds of Appeal a. That the Order passed under sec 143(3) of the I.T. Act, 1961 by the Ld. A.O. is unjustified and bad in law. b. That the Ld. A.O. erred in making addition of Rs. 71,41,345/- at the hands of the assessee on account of dumb documents found in the premises. C. That the Ld. A.O. erred in making an addition of Rs. 78,93,431/- on account of une....
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....o be applied so as to estimate the income of the assessee. 10. There are also number of Judicial Pronouncement regarding, net income to be adopted as shown earlier years on the unaccounted turnover of the assessee: i. Hon'ble Madhya Pradesh High Court in the case of Man Mohan Sadani vs CIT (2008) 304 ITR 0052 at para 7, wherein it was held/concluded as under "...net profit rate has to be applied..." ii. Hon'ble Guwahati ITAT in the case of Sayqul Islam vs ITO (ITAT Guwahati) (ITA No 235/GTY/2019) at para 13, wherein it was held/concluded as under "Normally, to estimate the profit of any assessee, the previous years' profit ratios are used and not the subsequent years' profit ratio. However, the subsequent years' profit ratios as submitted by the assessee provide us a bird eye and rough idea that what is the earning trend in the assessee's business." iii. Hon'ble ITAT Cuttak in the case of Bhambra Service centre vs ITO 2018 53 CCH 414 at para 36, wherein it was held/concluded as under ".....the Assessing Officer cannot make a wild guess but has to estimate the income of the assessee on the basis of pa....
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.... Hence, I confirm NP at the rate of 5% on total turnover of the appellant. The appellant has offered Rs. 75,00,000 /- as additional income which covers NP at the rate of 5% on the total turnover of the appellant. Hence, the above grounds of appeal is allowed. Further, ground no. 3 challenges the addition of Rs. 78,93,431/on account of estimated unexplained expenditure made by AO u/ s 69C of the IT Act, 1961. I have considered the submission of the appellant I am of the view that one has been estimated by the AO rejecting the books of accounts the source of expenditure relating to such turnover on which income have been offer stands explain. The addition made on account of coupons why treating the same as unexplained expenditure tantamount to double additions of the same amount and accordingly the addition of Rs. 78,93,431/- is hereby deleted. Accordingly, the said ground is allowed. Further in ground no. 4 the appellant has raised the contention of addition of Rs. 3, 69,516 / - on account of difference in stock physically found in the premises and that recorded in the books. I am of the view that since the AO has extrapolated the sales on the basis of seized mater....
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....ed with the offer for addition income. No separate addition is required at all in the peculiarity of the circumstances. Hence, grounds no.1, 2 and 3, are dismissed. 10. Ground no.4, relates to addition of Rs. 78,93,431, on account of unexplained expenditure. 11. During the course of proceedings, the learned Departmental Representative heavily relied on the assessment order passed. 12. On the other hand, the learned A.R. invited our attention that once the Assessing Officer has rejected books of accounts and estimated profits on turnover, the same shall take care of the expenses incurred for earning such profits and any addition made with respect to such expenses would tantamount to double addition. He relied upon the order dated 10/03/2021, passed by the Co-ordinate Bench of the Tribunal, Chennai Bench, in ACIT v/s S. Moorthy, ITA no.3091/CHNY/2019 (wherein the Hon'ble J.M. is a part of Corum). The relevant operative portion of the decision of the Tribunal is reproduced below:- "8. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. It is an admitted fact that the AO has rejected books of ....
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....sessee are rejected and income is estimated by applying certain profit rate, it would take care of all expenses necessarily to be incurred for earning profit and hence, when profit is estimated no separate addition can be made towards unexplained commission u/s. 69 of the Act. The ld.CIT(A) after considering relevant facts has rightly held that the AO is erred in making addition towards cash credit u/s. 68 of the Act and unexplained commission u/s. 69C of the Act, when the books of account were rejected u/s. 145(3) of the Act." 13. We have given a thoughtful consideration to the arguments made by the learned Departmental Representative and perused the material available on record. While going through the order passed by the Assessing Officer, we find that Assessing Officer has rejected the books of account and estimated profit on sales from the business. At the rate of 8% of the turnover, the learned CIT(A) deleted the addition stating the reason that once the books of accounts are rejected and the profit percentage has been estimated, no separate addition can be made towards unexplained expenditure under section 69C of the Act. Further, it is manifest that such expenditure has ....
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....A) by dismissing the ground no.4. 15. Insofar as ground no.5, is concerned, the additional income declared by the assessee of Rs. 75 lakh covers the addition based on 4% net profit estimated on the turnover. 16. Before us, the learned Departmental Representative stated that the income declared is general in nature and is not to be set off against the addition based on estimated profit on turnover. 17. On the other hand, the learned A.R. brought to the notice of the Bench that the said additional income has been declared under the head "Business and Profession", considering the discrepancies, unreconciled transactions, errors, and omissions involuntarily occurring in writing books of accounts, to avoid protracted litigation and buy peace of mind. The same has been duly reflected in the return of income under the head "Business and Profession" and taxes thereon have been duly paid at the time of filing return of income. 18. We have heard the rival arguments, perused the material available on record and gone through the orders of the authorities below. We find that the Learned CIT(A) has recorded that the appellant has offered Rs. 75 lakh, as additional income, which duly ....