TaxTMI 
TaxTMI 
2026 (9) TMI 1067
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....that the assessee filed its return of income on 30.11.2019, declaring total income of Rs. 133,67,24,010/- under normal provisions and book profit of Rs. 168,66,08,136/- u/s 115JB of the Income-tax Act, 1961 (In short, 'the Act'), which was processed u/s 143(1) of the Act. The assessee is engaged in the business of manufacturing of Iron ore pellet, sponge iron, billet, TMT bars, Ferro Alloys and power generation etc. A search action u/s 132 as well as survey u/s 133A of the Act were carried out on 15.06.2023 in financial year 2023-24 by the DDIT (Inv.), Unit - 2(4), Kolkata in case of "Shyam Steel Group". The assessee also covered u/s 132 of the Act during the search and several documents/materials were impounded. Accordingly, the case of the assessee was re-opened by issuing notice u/s 148 of the Act on 10.04.2023 after passing order u/s 148A(A) on 10.04.2023 after taking into the reply of the assessee to the notice u/s 148A(b) of the Act. The Assessing Officer (In short, 'the AO') observed from the report of the DDIT (Inv.), Unit - 2(4), Kolkata that on the basis of search conducted on 05.11.2020 at the premises of "Majee Group", the said part was supplying coal to various entitie....
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.... books of account were also not rejected. The AO merely relied on the evidences found in the search of third party, which were unsubstantiated. The ld. CIT(A) in the appellate proceedings, categorically recorded a finding, the addition made by the AO by treating the alleged cash purchases and unexplained expenditure is not sustainable on the ground that there was no corroborative seized materials and evidences brought on record by the AO. We also note that manufacturing of sponge Iron was fully by accepted by the AO. The AO has also not rejected the books of account by demonstrating any abnormality in the production or input-output ratio. Having recorded all these findings by the ld. CIT(A), he assumed and presumed that the assessee might have made some sales of coal outside the books which is hypothetical and only presumptions and thus directed the AO to apply a rate of profit of 5.25% on the alleged unrecorded cash purchases of coal. Therefore, we are inclined to set-aside the order of ld. CIT(A). In our opinion, the conclusion drawn by the ld. CIT(A) is purely on conjecture and surmises and sans any basis. The issue is squarely covered by the decision of this Tribunal in case of....
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.... Chowdhary as and when required as per the circumstances. The same cash used to be returned back to Shri Niraj Patwari when he resumed office/factory. The cash book was also submitted to evidence the sufficient cash in hand as on 05.06.2023. However, the submissions filed by the assessee were not appreciated and the learned AO with a prejudiced mind and preset notion held that there was under invoicing of sale of mill scale in AYs. 2015-16 to 2024-25. He considered it just and reasonable to apply Gross Profit (GP) to estimate the income on alleged unaccounted turnover for the year. He noted that the assessee has reported GP of 19.16% during A.Y. 2019-20 and accordingly added Rs. 28,32,641/-, by applying 19.16% on Rs. 1,47,84,000/- as undisclosed income. 9. In the appellate proceedings, the ld. CIT(A) partly allowed the appeal by observing and holding as under: "After considering the assessment order as well as submission of the appellant, it has been observed that Shri Deepak Chowdhury retracted his statement on 19/06/2023, just two days after it was recorded by the search team. Further, no evidence has been detected by to search team which could conclusively prove unde....
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.... that the net profit rate is most appropriate and reasonable to arrive at the figure of unaccounted income from the estimated suppressed sales. It has been observed from the Tax audit report that the net profit ratio to turn over of the appellant company during the relevant previous year was 5.25%. Therefore, estimated profit is calculated @5.25 % on the suppressed amount of sales of Rs. 1,47,84,000/- i.e. Rs. 7,76,160/- and addition to that extent is confirmed and the remaining addition of Rs. 20,56,481/- is hereby deleted. As a result, the appeal on this ground is partly allowed." 10. We find that in this case during the course of search, statement of Shri Deepak Chowdhury was recorded on 19.06.2023, which was retraced just two days after it was recorded by the search team. Further, no evidence has been detected by search team, which could conclusively prove the under-invoicing of mill scale sales. We note that it was admitted that company sells mill scale to local vendors and some of the sales were under-invoiced for payment of salary. Based on the said statement, the AO opined that cash required to be paid monthly to employees, ranged between sum of Rs. 15 to 18 lak....