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Facts
A search operation was conducted under Section 132 on the Hemraj Group, including the assessee, on 22.12.2020. The Assessing Officer added Rs.1,01,36,660/- as unexplained money under Section 69A based on seized documents, treating it as unaccounted sales. The Ld. CIT(A) partly allowed the appeal, sustaining an addition of Rs.12,67,083/- by applying a Gross Profit (GP) rate of 12.5% and deleting the remaining Rs.88,69,577/-. The revenue appealed the deletion, while the assessee filed a cross-objection against the sustained addition and the 12.5% GP rate, arguing for a 3.1% net profit rate.
Held
The Tribunal upheld the Ld. CIT(A)'s order, deeming it reasoned and speaking, and affirmed that a Gross Profit rate, not a net profit rate, should be applied to undisclosed transactions. Consequently, both the revenue's appeal and the assessee's cross-objection were dismissed.
Key Issues
Whether the CIT(A) was justified in partly deleting an addition for unaccounted sales and sustaining a portion by applying a Gross Profit (GP) rate of 12.5%. Whether a Gross Profit rate or a Net Profit rate is applicable for estimating income from undisclosed transactions found during a search.
Sections Cited
132, 69A
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Income Tax Appellate Tribunal, “C” BENCH, KOLKATA
Before: SHRI RAJESH KUMAR & SHRI PRADIP KUMAR CHOUBEY
(निर्धारण वर्ा / Assessment Year : 2021-2022) DCIT, CC-4(4), Kolkata Vs Hemraj Industries Private Ltd., 46B, Rafi Ahmed Kidwai Road, (1st Floor), Kolkata-700016 PAN No. :AAACH 8249 K (अपीलधर्थी /Appellant) .. (प्रत्यर्थी / Respondent) AND प्रत्याक्षेप सं/Cross Objection No.35/KOL/2025 (निर्धारण वर्ा / Assessment Year : 2021-2022) DCIT, CC-4(4), Kolkata Hemraj Industries Private Ltd., Vs 46B, Rafi Ahmed Kidwai Road, (1st Floor), Kolkata-700016 PAN No. :AAACH 8249 K (अपीलधर्थी /Appellant) .. (प्रत्यर्थी / Respondent) रधजस्व की ओर से /Revenue by : Shri Dipu Koley, Adl.CIT-Sr.DR निर्धाररती की ओर से /Assessee by : Shri S.M.Surana & Sunil Surana, ARs सुनवाई की तारीख / Date of Hearing : 24/07/2025 घोषणा की तारीख/Date of Pronouncement : 26/08/2025 आदेश / O R D E R
Per Rajesh Kumar, AM :
The revenue has filed appeal against the order dated 11.11.2024, passed by the ld. CIT(A), Kolkata-27, for the assessment year 2021-2022 and the assessee has filed cross objecting arising out of the appeal filed by the revenue.
The only issue raised by the revenue in its appeal is against the deletion of addition to the tune of Rs.88,69,577/- by the ld.CIT(A) thereby partly sustaining the addition to the tune of Rs.12,67,083/- as against the addition made by the Assessing Officer of Rs.1,01,36,660/- as unaccounted sale of the assessee outside the books of accounts, No.35/KOL/2025 whereas in the cross objection the assessee has challenged the sustenance of addition at Rs.12,67,083/- by the ld.CIT(A) estimating the profit at the rate of 12%.
Facts in brief are that a search and seizure operation u/s.132 of the Act was conducted on Hemraj Group on 22.12.2020. The assessee company is one of the said group and was also covered under the said search. The assessee filed its return of income on 28.02.2022 declaring total income at Rs.11,44,22,390/-.The Assessing Officer on the basis of documents seized during the search namely GDA4, GDA5 & GDA6 observed that the assessee has made certain transactions out of the books of accounts which aggregated to Rs.1,01,36,660/-. Accordingly the same was treated as unexplained money in terms of Section 69A of the Act and added the same to the total income of the assessee.
4, In the appellate proceedings, the ld. CIT(A) partly allowed the appeal of the assessee by applying a GP @12.5% thereby sustaining the addition to the extent of Rs.12,67,083/- and deleting Rs.86,69,577/- on the basis of statement of the assessee that the said undisclosed transactions represented the suppressed sales/turnover of the assessee . Finally by the ld. CIT(A) directed the AO to apply @12.50% towards the profit element embedded in the said undisclosed transactions.
The assessee challenged the order of the ld. CIT(A) against the rate applied by the ld. CIT(A), whereas the revenue has challenged the No.35/KOL/2025 order of the ld.CIT(A) against the wrong application of GP rate on the said transactions.
After hearing the rival contentions and perusing the material available on record, we find in the present case that the suppressed transactions were found during the course of search as per the seized documents being GDA4, GDA5 & GDA6. We find that the assessee has explained before the ld.CIT(A) that this transactions represented the suppressed sales made by the assessee during the course of business and, therefore, the entire value of transactions could not be added. Ld. CIT(A) applied the GP rate @12.5% and partly allowed the appeal of the assessee while deleting the addition to the extent of Rs.88,69,577/- and sustaining the addition to the extent of Rs.12,67,083/-. In our opinion, the order passed by the ld. CIT(A) is a very reasoned and speaking order and we do not find any merit in the contention of the ld.AR that a net profit rate should be applied qua which he has furnished statement in the paper book at page 41, wherein comparison chart of turnover, gross profit & net profit have been shown. According to the ld. counsel of the assessee submitted thag the net profit rate @3.1% should be applied as against 12.5% applied by the ld. CIT(A). In our opinion, the said contention of the ld.counsel of the assessee does not carry any merit and weight as it is the GP to be applied in an undisclosed transactions and not the net profit. Accordingly, we dismiss the appeal of the revenue as well as the cross objection filed by the assessee.