TaxTMI 
TaxTMI 
2026 (6) TMI 477
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....eal filed for the A.Y. 2019-20 in ITA No. 2331/Hyd/22025 are re-produced as under: "1. That the Ld. CIT(A)-11, Hyderabad has grossly erred both in law and on facts in disposing off the appeal ex-parte without granting any fair and proper opportunity of being heard to the appellant. 2. That the Ld. AO has grossly erred both in law and on facts in passing the order without granting any fair and proper opportunity of being heard to the appellant and without issuing draft assessment order. 3. That the Ld. AO erred in issuing a notice u/s 148 dated 08.01.2024 which ought to have been issued by Ld. AO, National Faceless Assessment Center (NFAC) u/s 151A of the Income Tax Act, in terms of the notification issued by the Hon'ble Central Board of Direct Taxes (CBDT) dated March 29, 2022. 4. That the Ld. CIT(A) erred in confirming the addition of Rs. 1,17,97,781/- made by the Ld. AO towards alleged value of suppressed sales in the return of income filed by the appellant compared to the value of sales found during the course of search. 5. That the Ld. AO and Ld. CIT(A) failed to appreciate that the appellant incurred costs towards packing materi....
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.... 4. Consequent to search, the assessment has been reopened, and notice under Section 148 of the Act, dated 08.01.2024 was issued and served upon the assessee firm. The assessee firm filed a return of income in response to notice issued under Section 148 of the Act, on 30.03.2024 admitting total income of Rs. 25,30,040/-. The case was selected for scrutiny. Notices under Section 143(2) and under Section 142(1) of the Act, dated 04.10.2024 and 09.12.2024 were served on the assessee firm calling for certain information along with explanation regarding the discrepancy of gross profit found during the course of seizure operation. In response, the assessee firm vide letters dated 12.12.2024 furnished computation of income, bank book, profit and loss account, balance sheet, etc. The A.O. on the basis of information submitted by the assessee firm coupled with incriminating material found during the course of search, observed that, there is a difference between purchases and sales as per the return of income filed under Section 139(1) of the Act, and as per purchases and sales register found during the course of search. The A.O. has tabulated purchases and sales in the assessment order and....
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...., the assessment is completed as under : In the return of income filed u/s 148 of the IT Act, the assessee has shown sales of Rs. 143,10,09,052/- and purchases of Rs. 140,35,57,270/-, However, since the assessee did not admit sales of Rs. 144,28,06,833/- as per the evidences found and seized as per Annexure nos. A/NES-HYD/01 to A/NES-HYD/31 during the search operation, the difference of Rs. 1,17,97,781/- is treated as suppression of sales during the year under consideration. Further, as against the purchases of Rs. 139,95,01,460/- ascertained as per the evidences seized during the search, the assessee has claimed purchases to the tune of Rs. 140,35,57,270/- in the return of income filed u/s 148 of the IT Act. As the assessee did not furnish any evidences w.r.t the purchases claimed in the ROI filed u's 148, the excess purchases claimed of Rs. 40,55,810/- are brought to tax. As above, the total undisclosed business income is worked out as under: As per seized material As per ROI u/s 148 Difference brought to tax Sales 144,28,06,833 143,10,09,052 1,17,97,781 Purchases 139,95,01,460 140,35,57,270 40,55,810 Total 1,....
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....ent is completed as under : In the return of income filed u/s 148 of the IT Act, the assessee has shown sales of Rs. 143,10,09,052/- and purchases of Rs. 140,35,57,270/-, However, since the assessee did not admit sales of Rs. 144,28,06,833/- as per the evidences found and seized as per Annexure nos. A/NES-HYD/01 to A/NES-HYD/31 during the search operation, the difference of Rs. 1,17,97,781/- is treated as suppression of sales during the year under consideration. Further, as against the purchases of Rs. 139,95,01,460/- ascertained as per the evidences seized during the search, the assessee has claimed purchases to the tune of Rs. 140,35,57,270/- in the return of income filed u/s 148 of the IT Act. As the assessee did not furnish any evidences w.r.t the purchases claimed in the ROI filed u's 148, the excess purchases claimed of Rs. 40,55,810/- are brought to tax. As above, the total undisclosed business income is worked out as under: As per seized material As per ROI u/s 148 Difference brought to tax Sales 144,28,06,833 143,10,09,052 1,17,97,781 Purchases 139,95,01,460 140,35,57,270 40,55,810 Total 1,58,53,591/- ....
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....at the assessee firm has inflated purchases except the difference of amount worked out by the A.O. on the basis of seized material and books of accounts. There is no identification of any purchases without being backed by any evidence. In the absence of any supporting material, merely on the basis of registers found during the course of search, the allegation of the A.O. that, the assessee firm has inflated purchases, is also incorrect going by the audited books of accounts. Although these facts have been explained to the A.O., the A.O. has ignored the explanation of the assessee firm and made addition towards the sales and purchases. Therefore, the learned counsel for the assessee firm submitted that, the addition made by the A.O. and sustained by the Ld. CIT(A) should be deleted. 8. The learned counsel for the assessee firm further, referring to the audited books of accounts of the assessee firm, submitted that, although the assessee firm has reconciled the difference and explained to the A.O., the A.O. made addition of entire amount of sales and purchases. If we consider the additions made by the A.O. to the total income, the financial results get distorted for the year under....
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....r explained the case except filing Form No. 35 along with statement of facts. The assessee firm could not reconcile the difference noticed by the A.O. when compared with the audited books of accounts and seized documents found during the course of search. Although the assessee firm claims to have reconciled the difference and explained to the A.O., but fact remains that even now the assessee firm could not furnish complete details with regard to suppressed sales noticed by the A.O. and alleged inflated purchases considered by the A.O. Since the assessment proceedings are ex parte and the assessee firm could not file relevant details before the A.O., the additions made by the A.O. should be upheld, or in the alternative, the matter may be remanded to the file of the A.O. for fresh consideration. 10. We have heard both parties, perused the material available on record and had gone through the order passed by the A.O. We have also carefully considered the relevant seized material found during the course of search in the form of daily sales register and purchases register. The A.O. has computed suppressed sales on the basis of seized material found during the course of search procee....
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....nt recorded from the Managing Partner of M/s. National Egg Stores, Shri Mohammed Waseem, during the course of search proceedings under Section 132(4) of the Act, and came to the conclusion that, the said firm has admitted suppression of sales and inflation of purchases. On the contrary, the assessee firm claims to have reconciled the difference in sales computed by the A.O. for each assessment year and according to the learned counsel for the assessee firm, the difference in sales computed by the A.O. is on account of reimbursement of packing material and transportation charges by the customers and the same has not been recorded in the regular books of accounts. The assessee firm has further claimed that, even with regard to purchases, the A.O. has simply compared the rough purchases register without even verifying the audited books of accounts which are true and complete where the purchases have been fully supported by the bills. The assessee firm further claimed that, it has fully reconciled the sales difference computed by the A.O. which is on account of cost of packing materials, included in the sales price and reimbursed later by the customers. Similarly, the assessee firm cla....
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....at they were not given sufficient time to file relevant details, the fact remains that even during the appellate proceedings, the assessee firm could not file complete details of reconciliation explaining the difference in sales and purchases computed by the A.O. Further, although the assessee firm claims to have reconciled the difference in sales computed by the A.O. and the reasons for the said difference is on account of reimbursement of cost of packing materials by the buyers, but fact remains that, at this stage, it is difficult to examine the reconciliation statement filed before us in the absence of any supporting evidence. Similarly, the assessee firm also claims to have explained the difference in purchases computed by the A.O. and claims that, the said difference is on account of not recording complete purchases in the rough book maintained by the assessee firm or difference in price of products from the date of purchase and the date of recording in the books of accounts. But once again, the assessee firm has failed to substantiate the claim with relevant evidences. Therefore, in our considered view, it is difficult to accept the reconciliation filed by the assessee firm ....
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....pose of estimation of profit, the assessee firm's own book result is a good basis for adopting gross profit for these assessment years. Since the assessee firm has declared an average gross profit of 1.25%, in our considered view, for estimating profit on suppressed sales, the average gross profit declared by the assessee firm for these assessment years is the best yardstick. Therefore, we direct the A.O. to estimate 1.25% profit on suppressed sales computed for the year under consideration. 15. Insofar as the alleged inflated purchases computed by the A.O., going by the facts of the case and the evidence filed by the assessee firm, in our considered view, the A.O. has computed alleged inflated purchases only on the basis of purchases declared by the assessee firm in the books of accounts and purchases recorded in the seized material found during the course of search. The A.O. has computed inflated purchases of Rs. 40,55,810/- for assessment year 2019-20 on the basis of purchases as per the seized material, which was at Rs. 139.95 crores, and purchases as per the audited books of accounts were at Rs. 140.35 crores. Similarly, for assessment years 2020-21 and 2022-23, the A.O. ha....