TaxTMI 
TaxTMI 
2024 (2) TMI 1651
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....er three years & hence extrapolation on such sales over these three years was correctly applied by the AO 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in stating that the Hon'ble Jurisdictional High Court of Gujarat has held in several cases that extrapolation is not permissible, even while quoting the decision of the Hon'ble Jurisdictional High Court in the case of Yogesh Kirchand Shah V/s ACIT in which it is held that the proposition that even for block assessment proceedings the AO would have the authority to estimate income cannot be disputed. 3 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating that the seized materials showed unaccounted sale over different periods in different assessment years leading to a reasonable inference that assessee was indulging in unaccounted sales on a regular and consistent basis. 4. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in giving benefits of expenses in working out the profit from unaccounted sales without any evidence being found or submitted for allowing such benefits. ....
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....ettlement commission and provided sworn affidavit in this regard. During the course of search/survey, the loose papers were not confronted to the partner Shir Ramnikant Thakkar. Likewise, Shri Umresh Kanubahi Patel has retracted from his statement and provided sworn affidavit that the transaction noted on loose sheets are in connection with the job work activity of Shri Ramnikant Thakkar. The assessee further contended that based on noting or jotting made on few loose sheets and without any independent corroborative evidence, the theory of unaccounted sales cannot be extrapolated on the entire sale shown in the books of accounts. 5.2 However, the AO rejected the contention of the assessee by holding that the retraction by Shir Umesh Kanubhai Patel was filed after passing of 2 years, therefore same cannot be accepted for the reason being afterthought. Likewise, the transaction recorded on the impounded material clearly mentioned sale of China Clay in cash by the assessee firm and other associate firm Amrapali & Company and M/s Sabar Clay Industries, therefore claim that noting on loose paper/documents are in connection of Job work activity of Shri Ramnikant Thakkar cannot be acce....
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....f documents were found which can be held as part incriminating. The unaccounted sale is in respect of trading in goods. It is settled principles that without purchase, no sale could have been made. There was no evidence found showing any unaccounted purchases. Therefore, if the additions made by the AO is considered. this will give unusual result ie net profit of 54.50%, which is not possible. During the course of search, no other significant asset or details of expenditure was found, where such unaccounted income was invested/used. The appellant further contended that even the books of accounts are rejected, the AO has to make assessment as per section 144 of the Act. The appellant relied upon several case laws in which it has been held that while estimating the income u/s. 144, though some amount of estimate is required but it cannot be illogical or irrational. The appellant further contended that only on the basis of very few transactions of alleged unaccounted sales and in absence of any other evidences, the same cannot be extrapolating such unaccounted turnover for the entire years transactions. The appellant cited several case laws, as reproduced above, in support of this con....
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....XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 5.1.3 As reproduced above, the Hon'ble jurisdictional High Court of Gujarat has held in several cases that extrapolation is not permissible. The additions should be made on the basis of seized evidences only and the ratio of the seized documents cannot be allowed to spread over the transactions of whole year, Therefore respectfully following the binding judgement of the Hon'ble jurisdictional High Court of Gujarat, Ahmedabad, it is held that the extrapolation made by the Assessing Officer are not justified, hence, additions made by the Assessing Officer have to be restricted only to the evidences found during the search and survey. During the year under consideration, the cash sales made by the appellant is only of Rs. 1,40,500/- as per the seized documents. The appellant contended that profit @ 6.6% should be considered as income but appellant's contention is not found acceptable for the reason that for the unaccounted sales, the appellant neither made any extra purchase nor he incurred any expenditure. No such evidence has been found during the course of search/survey. Therefore, it is considered that the appell....
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....see has earned unaccounted income for a specific period or from particular transaction and accordingly the Revenue authority being the AO presumed that the assessee should also have earned similar unaccounted income for other period or from other transactions. However, such extrapolation techniques cannot be applied in each and every case or in arbitrary manner. To apply extrapolation, there must be certain corroborative material on record suggesting that the assessee has earned similar unaccounted income from other transactions also. In the absence of corroborating material or evidence suggesting that the assessee has also earned unaccounted/undisclosed income from other transactions, the finding of incriminating material cannot be extrapolated to the other transactions. In holding so, we draw support and guidance from the judgment of Hon'ble Bombay High Court in the case of CIT v. C.J. Shah & Co. [2000] 246 ITR 671/[2001] 117 Taxman 577 where it was held that when material detected after search and seizure operations carried out, the AO is required to determine the undisclosed income. But in cases of the additions based on estimates, the AO is required to do so based on scien....
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.... corroborative material suggesting that the on money was received by the assessee in the A.Y. 2015-16 also. The relevant finding of the Hon'ble Court is extracted as under: The Commissioner (Appeals) as well as the Tribunal concurrently found that there was total dearth of evidence to come to conclusion that there was on-money transaction and on such count it would not entitle the Assessing Officer to make addition in the income. The material in the nature of loose papers was not reliable. More particularly it was not related to the assessment year 2015-16 and nothing was there to show that the on-money was received in respect of sale of units recognised to be the sale of assessment year concerned. The findings of the Commissioner (Appeals) and Tribunal are based on ground of absence of evidence. The decision is based on appreciation of evidence. 10.2 Likewise, we also draw support and guidance from the order of the coordinate bench of Kolkata tribunal in the case of Fort Project (P.) Ltd. reported in [2013] 29 taxmann.com 84. In the case of Fort Project (P.) Ltd., certain materials were found during the course of search marked as RM/5 from which it was found that o....