SAILA BEHARI CHAKRAVORTY,KOLKATA vs. I.T.O.,WARD-3(2), KOLKATA

This appeal filed by the assessee pertaining to the Assessment Year (in short “AY”) 2011-12 is directed against the I.T.A. No.: 300/Kol/2019 Assessment Year: 2011-12 Saila Behari Chakravorty. order passed u/s 250 of the Income Tax Act, 1961 (in short the “Act”) by ld. Commissioner of Income-tax (Appeals), Burdwan [in short ld. “CIT(A)”] dated 24.12.2018 which is arising out of the assessment order framed u/s 144 of the Act dated 31.03.2015.

The assessee is in appeal before this Tribunal raising the following grounds: “

Per contra, ld. D/R vehemently argued supporting the orders of both the lower authorities.

We have heard rival contentions and perused the records placed before us. The only point of dispute is with regard to the undisclosed sales of Rs. 46,35,094/- which appeared in the Form 26AS but the assessee did not disclose the same in his books of account for AY 2011-12. In the assessment order, ld. AO has observed that the assessee has filed the return offering the business income on presumptive basis u/s 44AD of the Act applying 8% on the gross receipts. The alleged sum is undisputedly the undisclosed sales of the assessee. Now, whether the assessee should be liable to tax on the sale amount or on the profit element in the sale amount. Hon’ble Gujarat High Court in the case of Commissioner of Income-tax vs. President Industries reported in [2002] 258 ITR 654 (Gujarat) order dated 20.04.1999 has held that “The sales only represent the price received by the seller of the goods for the acquisition of which it has incurred the cost. It is the realisation of excess over the cost incurred that only forms part of the profit included in the consideration of sales. Therefore, unless there is a finding to the effect that the investment by way of incurring cost in acquiring goods which have been sold has been made by the assessee and that has also not been disclosed, the question whether entire sum of undisclosed sales proceeds can be treated as income of the relevant assessment year answers by itself in negative.”

In light of the ratio laid down by the Hon’ble Gujarat High Court in the case of President Industries (Supra) we find that the same is squarely applicable on the facts of the instant case and there is no finding about the unexplained purchases as the only finding is that there are undisclosed sales and since there has to be a cost of the goods which would first have been purchased and then have been sold only the profit element needs to be subject to tax. Since the assessee has opted for presumptive taxation and offered the income/profit @ 8% of the gross receipt, keeping into the fact that the assessee failed to disclose the considerable amount of sales in its income tax return, we direct ld. AO to calculate the profit @ 10% to replace the addition of undisclosed sales with 10% of the undisclosed sales i.e. Rs. 4,63,510/-. Therefore, we sustain the addition at Rs. 4,63,510/- and partly allow the ground raised