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Facts
The assessee filed its return, and a survey under Section 133A was conducted. Subsequently, the AO made an addition of Rs. 69,10,285/- under Section 69 as unexplained investment, based on a partner's statement admitting to unaccounted sales. The assessee argued that these sales were later recorded in the books, and there was no excess stock, only a delay in updating the accounting records.
Held
The CIT(A) partly allowed the assessee's appeal, deleting a major portion of the addition by treating it as unaccounted sales and applying a 6% Gross Profit (GP) ratio to the stated amount. The Income Tax Appellate Tribunal (ITAT) found no infirmity in the CIT(A)'s order and upheld its decision, dismissing the Revenue's appeal.
Key Issues
Whether the addition under Section 69 for unexplained investment, arising from a survey on unaccounted sales, should be sustained in full or if it is appropriate to apply a Gross Profit rate to the unaccounted sales for partial deletion.
Sections Cited
139(1), 133A, 143(2), 142(1), 143(3), 69
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “C” BENCH, KOLKATA
This is an appeal preferred by the Revenue against the order of the Commissioner of Income-tax (Appeals), Kolkata-27 (hereinafter referred to as the “Ld. CIT(A)”] dated 01.05.2024 for the AY 2019-20.
The brief facts of the case are that the assessee filed his original return of income u/s 139(1) of the Income-tax Act, 1961 (the Act) on 20.10.2019 declaring total income at Rs. 10,35,370/-. Later, a survey was conducted u/s 133A of the Income Tax Act, 1961 on 13.02.2019 on the assessee. Subsequently, the case was selected for compulsory scrutiny for the year of survey i.e., the instant AY 2019-20. Subsequently, notice u/s 143(2) & 142(1) was issued to the assessee
Aggrieved by the said order the assessee preferred the appeal before the ld. CIT (A), wherein the appeal of the assessee has been allowed.
Being aggrieved and dissatisfied, the Revenue has preferred the appeal before us.
The ld. DR has challenged the order of ld. CIT (A) thereby submitting that the ld. CIT (A) erred in determining the income of Gross Profit at the rate of 6% of ₹69,10,285/-, whereas the assessee had himself admitted the net profit to be ₹70 lacs in his statement but did not offer the said unaccounted income for the relevant assessment year for tax.
Contrary to that the ld. AR support the impugned order thereby submitting that the ld. AO has relied on the statement of Shri Dipak Shah and concluded that the assessee has an unexplained stock of ₹69,10,285/-, ignoring the total reply of Shri Dipak Shah in which he has stated that it is an unaccounted sale and does not enter in the books of accounts as on date. The ld. AR submits that Shri Dipak Shah has clearly stated that there is unaccounted sale which were not recorded in the books of account on the date of survey, no inference can be drawn that sale was unaccounted. The ld. AR further submits that there was
Upon hearing the submissions of the counsel of the respective parties, we peruse the order passed by the ld. AO as well as the ld. CIT (A) and find that the ld. AO has held that Dipak Shah being the partner of the firm has in his statement has accepted that ₹69,10,285/- was unaccounted sale for the relevant assessment year but from the return filed by the assessee it cannot be verified whether the assessee has offered the amount of ₹69,10,285/- to tax or not. The assessee in this regard is silent hence, the ld. AO treated the same amount as unexplained investment u/s 69 of the Act. It is pertinent to mention here that the statement of shri Dipak Shah recorded u/s 133A of the Act reveals thus “it is unaccounted sale and does not enter in the books of account as on date.” It is further pertinent to mention here that there is no excess stock and all the stock found at the time of survey was related to the books of accounts. The assessee has clearly stated that the sale has been duly recorded in the audited books of accounts and same is included in the total turnover and duly offered for taxation in the return of income. We have gone through the order
“6.2. Discussion and decision: 6.2.1. I have gone through the assessment order as well as the submissions of the assessee. It is observed that during the aforesaid survey operation, the survey team had unearthed shortage of stock of 4687.63 quintals valuing Rs.69,10,285.18. It is also noticed that vide the recorded statement, Shri. Dipak Saha had intimated the survey team that the shortage of stock was because of sales which are yet to be recorded in the books of account of the assessee. The assessee both in the assessment proceedings as well as in the appellate proceedings had submitted that the said unaccounted sale was not at all unexplained as the same was recorded into its books of account after the survey operation. 6.2.2. When there is a shortage of stock, it can be inferred that the sale was already done, but not recorded in the books For the unaccounted sale a GP ratio is to be applied for estimating the profit. Reliance may be placed on the judgement of Gujrat High Court in the case of 'PCIT-2 vs. Rameswar Textile Mills Ltd 07/09/2015', 'ACIT vs. comor granito Pvt. Ltd.' In which the Hon'ble High Court and ITAT Rajkot held that for unaccounted sales GP ratio is to be applied. The assessee has stated in his reply that the GP ratio in this line of business is @5.23%. However, to meet the ends of justice, the GP is estimated at 6%. The unaccounted sales found and estimated by the survey team of Rs.69,10,285/-. The GP @ 6% for the Rs.69,10,285/- comes to Rs.4,14,617/-. The AO is directed to delete Rs.64,95,668/- (Rs.69,10,285/- less Rs.4,14,617/-). Therefore, the ground raised by the assessee is partly allowed.”
08. Going over the facts of the case as well as the decision made by the ld. CIT (A), we do not find any infirmity in the order. Accordingly, we do not find any merit in the appeal of the Revenue and hence, dismissed.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court on 23.06.2025.