ASSISTANT COMMISSIONER OF INCOME TAX, PANAJI vs. ARCHANA BHOBE, PANAJI

ITA 260/PAN/2024Status: DisposedITAT Panaji23 October 2026AY 2016-179 pages
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What did the Tribunal hold?

The Tribunal held that the CIT(A) correctly applied the principle that only the profit element embedded in suppressed receipts is taxable, not the entire receipts. The Revenue's ground regarding the 25% net profit rate was dismissed. The Tribunal noted that the assessee declared a 19% net profit rate, which increased to 21.85% after offering additional income. Considering the judicial precedents, including the decision in M/s. Sumer Builders, which states that on-money receipts are undisclosed receipts and only the profit element is taxable, the Tribunal deemed it appropriate to apply a Net Profit rate of 23% on the unaccounted sales turnover, as against the 25% applied by the CIT(A). This decision was based on the fact that expenses are incurred for sales, justifying the application of a net profit rate. The appeals of the Revenue were dismissed, and the cross-objections of the assessees were partly allowed.

What were the facts?

The appeals by the Revenue and cross-objections by the assessees, Gurudatt Shrikant Bhobe and Archana Bhobe, pertain to Assessment Year 2016-17. The orders under challenge are from CIT(A)-2, Panaji, arising from assessment orders passed under Section 143(3) read with Section 153A of the Income Tax Act, 1961. The assessees are husband and wife, governed by community of property laws, leading to income apportionment. During a search, suppressed gross receipts were discovered, with actual sales of Rs. 15.52 crore against declared Rs. 9.34 crore. The assessee accepted additional income but could not substantiate claimed out-of-books expenses of approximately Rs. 4.90 crore. The Assessing Officer made additions for the difference in sales, apportioned between the husband and wife.

What were the issues?

1. Whether the CIT(A) erred in directing the AO to treat only 25% of unaccounted receipts as income earned, thereby ignoring the ratio in Kanhaya Metal Works (Revenue's contention)? The assessee argued that only the profit element should be taxed, not the entire receipts. The Revenue contended that the CIT(A) erred in applying a 25% net profit rate and that the AO's assessment should be restored. The assessee, in its cross-objection, argued that the 21.85% net profit offered by them should have been accepted by the CIT(A) instead of 25%. 2. Whether the CIT(A) erred in directing the AO to provide telescoping to the unaccounted cash of Rs. 1,74,40,297 found in the residence of Shri JP Agarwal (Revenue's contention)? This ground was dismissed as infructuous as it did not arise from the impugned order. 3. Whether the assessment made under Section 143(3) read with Section 153A was valid, specifically concerning the approval under Section 153D (Assessee's contention)? This ground was not pressed by the assessee.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 153A,Section 153D,Section 44AD

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Heard together (3 matters)

ITA No.259/PAN/2024
ITA No.260/PAN/2024
CO Nos.5/PAN/2025

Read from the judgment's own cause title. This page is filed under one of them.

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI DB BENCH, PANAJI BEFORE DR.MANISH BORAD, ACCOUNTANT MEMBER AND SHRI VINAY BHAMORE, JUDICIAL MEMBER आयकर अपील सं. / ITA No.259/PAN/2024 Assessment Year : 2016-17 21/454, Nagali Hills, Dona Paula, Bardez, North Goa, Goa – 403004 PAN : ACFPB1729E Appellant Respondent

Cross Objection No.05/PAN/2025 (Arising out of ITA No.259/PAN/2024) Assessment Year : 2016-17 21/454, Nagali Hills, Panaji Dona Paula, Bardez, North Goa, Goa – 403004 PAN : ACFPB1729E Cross Objector Appellant in the appeal

आयकर अपील सं. / ITA No.260/PAN/2024 Assessment Year : 2016-17 PAN : AELPB3946F Appellant Respondent

Cross Objection No.15/PAN/2026 (Arising out of ITA No.260/PAN/2024) Assessment Year : 2016-17 PAN : AELPB3946F Cross Objector Appellant in the appeal CO Nos.5/PAN/2025 and 15/PAN/2026

Appellant by : Shri P.K. Bansal, Advocate Respondent by :

The order continues below.

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