TaxTMI 
TaxTMI 
2025 (1) TMI 1820
X X X X Extracts X X X X
X X X X Extracts X X X X
....ccounting, books were audited and closed. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) has failed to appreciate that also no withdrawal for corresponding purchase to these sales were noted in books hence unexplained source that is sales minus GP should be added u/s 69A and considered for violation u/s 40A(3) of the Act." 3. Facts in Brief:-The assessee is a company carrying on business of manufacturing of vegetable palm oil. It purchases fresh fruits bunches from the farmers in nearby area and the fresh fruits bunches so purchased are crushed for extraction of palm oil. There was a search and seizer action under section 132 of the Income Tax Act, 1961 ("the Act") was conducted in Radhika Group of cases at Visakhapatnam on 25/08/2021. In consequence of search and survey action was also conducted on 25/08/2021, at the office premises of the assessee and factory premises at Viziyanagaram. Subsequently, notice under section 148 of the Act was issued in response to which the assessee declared income of 2,54,08,560. The case was selected for compulsory scrutiny and ultimate the assessment order was passed under section 143(3) r/w section 147 of the Act....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pellate proceeding appellant submitted that though during search proceeding the Production Manager and the accountant of the appellant stated that such amount as mentioned in these rough noting represents cash sales made by the company however, however, no cash transaction was undertaken by the company and these rough noting belongs to the employers prane company It was further stated by appellant that the employees of the company were in contact with certain local buyers who could extract oil from the shells. The shells further required processing and therefore such employees may have incurred expenses like purchases, labour, transportation, loading and unloading etc. Appellant alternatively pleaded to restrict the addition only to the extent of profit embedded in such cash sales. During the course of search at business premises of the appellant various documents were found which contained receipt of cash from different parties that are not recorded in regular books of accounts. The AO is correct in holding that they are unrecorded sales. Now the issue is whether full amount of cash received can be added to income or the profit embedded in such sales should have been adde....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d in the profit and loss account. Hence, the basis of such a ground relating to this effect which has been raised by the revenue is beyond our comprehension. In these circumstances we do not find any infirmity in the order of learned CIT Appeal. Accordingly, we uphold the same. c). CIT V/s. Balchand Ajitkumar 263 ITR 610 (MP) Income from Undisclosed sources Addition Credit sales not reflected in books of account - Total un-recorded sales cannot be regarded as profit of the assessee Net Profit rate has to be adopted. d). CIT V/s. President Industries 258 ITR 654 (Guj) It cannot be a matter of an argument that the amount of sales by itself cannot represent the income of the assessee who has not disclosed the sales. The sales only represented the price received by the seller of the goods for the acquisition of which it has already incurred the cost. It is the realization of excess over the cost incurred that only forms part of the profit included in the consideration of sales. e). V. R. Textiles vs JCIT 11-ITR 476 (Trib) Ahmedabad It is settled law that the entire undisclosed sales could not be treated as profit of the assessee. We....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ived by the assessee. Considering facts of the case and respect wing the view taken Hon'ble High Courts and ITAT account of unrecorded sales is the addition of Rs. 1,49,01,910/- made u/s 69A on account of unrecorded sales is deleted and the A.O. is directed to make addition gross profit @8.95%, which is average of last three years gross profit, c unrecorded cash sales of Rs. 1,49,01,910/- as business income. According ground no. 4, 5 and 6 are partly allowed." Against this order of the learned CIT(A), the Revenue is in appeal before the Tribunal. 6. Before us, the learned Counsel for the assessee submitted that this issue is covered by the decision of the Co-ordinate Bench of the Tribunal, Nagpur Bench, rendered in assessee's own case for the assessment year 2021-22 and prayed that the same may be followed and the addition should be restricted to gross profit on such unrecorded sales. 7. We have heard the arguments of rival parties, perused the material available on record and gone through the orders of the authorities below. The issue for our adjudication is squarely covered by the decision of the Co-ordinate Bench, passed in assessee's own case in DCIT vs Ra....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d before Assistant Commissioner of Income Tax dated 14/11/2022 62 & 63 6. Copy of Affidavit of Vandrangi Satya Rao & K. Vamsi Khrishan 64 To 69 7. Copies of reply filed before Assistant Commissioner of Income Tax dated 12/12/2022 70 To 76 The learned CIT(A), at Page-9 of his order, has also prepared comparative chart of gross profit and net profit for last three years, which are reproduced below:- Sr. No. Assessment year Gross Profit Net Profit 1. 2021-2022 14.59% 5.56% 2. 2020-2021 10.42% -2.71% 3. 2019-2020 9.95% 4.21% 4. Average Profit 11.65% 2.55% The chart showing the assessee was having gross profit @14.59% and net profit @5.56% during the previous year relevant to the assessment year 2021-2022, @10.42% gross profit and loss (-)2.71% during the previous year relevant to assessment year 2020-2021 and gross profit @9.95% and net profit @4.21% during the previous year relevant to assessment year 2019-2020 and there is average gross profit @11.65% and average net profit @2.55%. There is settled law that the entire undisclosed sales could not be treated as profit of the assessee. In ....