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Facts
A survey action was conducted at the assessee's business premises, where incriminating materials were found. The AO estimated the turnover based on a few bills seized and extrapolated it for the entire year, leading to an addition of unexplained money. The assessee contended that the business was transferred to a new entity and provided sales summaries.
Held
The Tribunal held that the AO's estimation of turnover was not substantiated and lacked proper verification from the books of the new entity. The sales figures of the new entity for the relevant dates were higher than the AO's estimation, rendering the assessment exercise illogical.
Key Issues
Whether the addition made by the AO based on extrapolated turnover from a few seized bills, without proper verification of the business's actual sales records, is justified.
Sections Cited
69A, 133(A)
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Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY, HON’BLE & SHRI NARENDRA KUMAR BILLAIYA, HON’BLE
O R D E R
PER NARENDRA KUMAR BILLAIYA, AM:
This appeal by the revenue is preferred against the order of the ld. CIT(A) – 48, Mumbai [hereinafter “the ld. CIT(A)”] dated 12/10/2022 pertaining to AY 2019-20.
The sum and substance of the grievance of the revenue is that the ld. CIT(A) erred in deleting the addition of Rs. 5,39,10,500/- u/s 69A of the Act as unexplained money. 3. Representatives of both the sides were heard at length, case records carefully perused and the relevant documentary evidence brought on record duly considered in the light of Rule 18(6) of the ITAT Rules, 1963. 4. Briefly stated the facts of the case are that a survey action u/s 133(A) of the Act was conducted on 20/10/2018 by the ACIT-32(3), Mumbai. During the survey action, certain incriminating material were 2 found, seized and impounded which consisted of cash book, cash memo, annexures, loose papers, pass book etc. 5. The assessee is into the business of sweets and snacks shop in Borivali, Mumbai by the name of Vividham Sweets and Dry Fruits. For the purposes of operating the business, the shop has a token in the form of a bill which is given to the customers based on his choice from the menu. Accordingly, the assessee’s major business is done in cash. 6. It has been brought to the notice of the AO that the business had been transferred and is now being carried out in the name of M/s. Krishay Enterprises from 01/04/2018. During the course of survey action, the two bills were found in the name of Vividham Sweets, dated 24/10/2018 and 25/10/2018 which are the basis of the present quarrel. Bills dated 24/10/2018 totaled to Rs. 25,467/- and the bills dated 25/10/2018 totaled to Rs.68,977/-. The AO was of the opinion that on an average, 200 bills are issued per day as per the bills token number found, out of which only the above mentioned two bills were impounded. The AO computed the estimated the turnover as under:- Sr. No. 24.10.2018 25.10.2018 Total Bills found 37 86 Total Amount of bills found 25467 68977 Average bill value of bills 675 802 found Total Bills per day (based on 200 200 the token number of the bills seized) Total estimated turnover 1,35,000 1,60,400 per day 3 6.1. The AO not only computed the estimated turnover but also extrapolated the same for the entire year and calculated the cash income at Rs. 5,39,10,500/-. 7. Before the ld. CIT(A), it was reiterated that Vividham Sweets is a brand and Vividham Sweets and Krishay Enterprises are two partnership firms and Vividham Sweets and Dry Frutis was dissolved on 31/03/2018 and the entire business was conducted by Krishay Enterprises from 01/04/2018. The sales summary of both the firms for AY 2018-19 was explained as under:- Assessment Year Vividham Sweets & Dry Fruits Krishay Enterprises 2017-18 3,58,95,939 - 2018-19 4,40,67,682 - 2019-20 26,54,966 3,84,66,811 2020-21 - 3,94,14,694
It was further explained that the total sales of Krishay Enterprises on 24/10/2018 and 25/10/2018 are much higher than the amount mentioned in the assessment order as under:- Date Sales amount Sales amount declared mentioned in show by Krishay Enterprises cause notice and assessment order 24.10.2018 25,467 56,141 25.10.2018 68,977 86,225
After considering the facts and the submissions, the ld. CIT(A) was convinced and deleted the impugned addition.
As mentioned elsewhere, the entire quarrel revolves around the bills found for two days i.e., 24/10/2018 & 25/10/2018. The amounts mentioned in these two bills are meagerly Rs. 25,467/- and Rs.68,977/.