TaxTMI 
TaxTMI 
2024 (10) TMI 1807
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....3,16,16,703/- for A.Y. 2021-22 and the assessee had failed to submit any evidences regarding purchases, direct expenses, indirect expenses related to this cash sales. Therefore, the A.O. added the entire unrecorded cash sales to the income of the assessee. 2. On the facts and circumstances of the case & in law, the Ld. CIT(A) erred in directing the A.O. to make addition of Gross Profit @ 11.65% which is average of last three years gross profit on unrecorded cash sales without appreciating the fact that the assessee failed to prove that the corresponding purchases were also not accounted against the unaccounted cash sales. 3. On the facts and circumstances of the case & in law, the Ld. CIT(A) erred in directing the A.O. to make addition of Gross Profit @ 11.65% which is average of last three years gross profit on unrecorded cash sales without appreciating the fact that no accounted purchases were found during the course of search, therefore in absence of documentary evidences the A.O. was justified in addition entire sale of Rs. 3,16,16,703/- as income of the assessee. 4. Any other grounds and fact to be raised at the time of appeal" 3. Fact in Brief:- ....
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....o these sales, hence treated the entries in the impounded documents as unrecorded sales and made addition of the entire amount as unexplained sales under section 69A, read with section 115BBE of I T Act. 4.3) In this context it is submitted that During the course of search proceedings, some loose sheets and rough noting were found at the premises of the assessee. The production manager and the accountant of the assessee stated that such amount as mentioned in these rough noting represents cash sales made by the company. However, it is humbly submitted that no cash transaction was undertaken by the company and these rough noting belongs to the employees of the company. 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. The director of the company has also denied any sales being made by the company which were not accounted in the books of the accounts in his statement U/s 132(4) during the course of search proceedings. The assessee company ....
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....AO having accepted the assessee's submission in earlier two years cannot deviate and add the entire unaccounted sales as income of the assessee in the current assessment year. We find nothing in the AO's order, which shows that the AO has found that all the purchases and expenses relating to undisclosed sales were booked 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. 4.4.3) it is humbly submitted that it is settled position of law that in respect of unrecorded sales entire sale cannot be added to income but only the profit element in it may be added to income. Further reliance is placed on following judgments- 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 CIT V/s. President Industries 258 ITR 654 (Guj) It cannot be a ....
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....9) In this case the AO proceeded on the basis of papers found during the course of survey and made addition. In appeal ITAT held that such papers apparently are not complete record of the income or expenditure of the assessee. Therefore, the total income cannot be properly calculated on the basis of such papers. CIT(A) has rightly directed that the profits of the assessee's business as a builder should be estimated by applying net profit rate of 15 per cent of the total consideration as per the sale agreements and also on the on money received by the assessee. 4.4.4) Considering facts of the case and legal position on the issue it is most humbly prayed to restrict the addition on account of unrecorded sales to the extent of profit embedded in the sales. Comparative gross profit and net profit ratio for last 3 years is as under- 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% 5. The learned CIT(A), at Page-10 to 13 of his order, observed as under:- "Ground no. 6,7 and 8 are reg....
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....T Vs. President Industries Ltd (258 ITR 654) has held that "addition cannot be of the entire undisclosed sales proceeds. Only the profit embedded in sale proceeds cash be taxed" Similar view has been taken in following cases - a) Man Mohan Sadani v. CIT (304) ITR 0052) wherein following question of law was raised before the hon'ble Madhya Pradesh High Court "(1) Whether, in facts and circumstances of the case, the tribunal was correct in law in holding that the entire sales were liable to be assessed as income even when the purchases were recorded in books of accounts?" Answering to the question the court held that the entire sales proceeds of the assessee should not be added to the income, only net profit rate has to be applied" b) A similar question was raised by Revenue before Nagpur bench of ITAT in ITA No. 189/Nag/2013 (ACIT v. Hasan Electricals)- "1. Whether on the facts and in the circumstances of the case, the CIT Appeal is correct whether income from unaccounted sales is to be estimated at GP rate inspite of the fact that the cost price of all the purchases including the purchases corresponding to unaccounted sales has ....
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....gainst unaccounted sales for the purpose of making the addition on account of undisclosed income of the assessee. Similarly, learned CIT(A) was justified in considering the issue of deployment of minimum capital investments for the purpose of making and rotating the sales outside the books of account. f) DCIT v. Brijwasi Developers Pvt Ltd. (ITA No. 290/Ahd/2013) In this case the issue involved was whether "on-money receipt" admitted by the assessee and calculated on the basis of material found during the course of survey is to be taxed in toto or income is to be determined by applying a specific rate of profit out of this "on-money receipt". The Hon'ble ITAT held as under- "In view of the facts of the case and respectfully following the law laid down by the jurisdictional High Court and Tribunal, I am of the considered view that even in the present case, where there are incomplete evidences of both unaccounted income (on money) and unaccounted expenditure incurred therefrom, the A.O. is not justified in making addition for the entire unaccounted receipts i.e. on-money in respect of 3 flats of 'Platinum Apartment' sold during the year und....
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....ated 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. In support of the its contention the assessee has submitted the affidavit of Vandrangi Satya Rao and K. Vamsi Khrishan, which is on Page-64 To 69 of the Paper Book, they have also denied the contention recorded in the statements during the course of search and seizure action. The assessee also furnished paper book containing the following documents which are tabulated below:- Sr. no. Particulars Page no. 1. Copy of acknowledgment of return and Computation of Income 09 To 14 2. Copy of audited Financial Statement and schedule 14 To 42 3 Copy of Ledger A/c. of Loss from LLP 43 4. Copy of Intimation U/s. 143(1) of the Act Dated 24/08/2022 44 To 61 5. Copy of reply filed 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....