MOORTHY RAMASUBRAMANIAN,TUTICORIN vs. DCIT, CIRCLE-1,, TIRNELVELI

आदेश / O R D E R MANU KUMAR GIRI (Judicial Member)

5.4 I have examined the assessment order, submissions, and documents placed on record by the appellant during the appellate proceedings. It is noted that the appellant disclosed unaccounted income of Rs.30,00,000/- for the relevant year at the time of the survey conducted on 30.01.2018. The Assessing Officer (AO) completed the assessment by making an addition of Rs.6,00,000/-, representing the difference between the estimated net profit of Rs.37,83,249/- and the disclosed net profit of Rs.31,83,249/-, after rejecting the appellant’s books of account u/s. 145(3) of the Act. The appellant, however, contended that the addition for two months, amounting to Rs.6,00,000 (Rs.3,00,000 × 2 months), was unjustified. 5.5 It is pertinent to note that during the assessment proceedings, the appellant was required to furnish month-wise details of opening and closing stock, details of the top ten parties to whom sales were made and from whom purchases were effected, as well as particulars of direct expenses supported by documentary evidence. The appellant failed to submit these details before the AO. During appellate proceedings, the appellant only submitted copies of the order passed u/s. 143(1), the computation 12.02.2018 regarding disclosure, power of attorney, etc., but again failed to provide the requisite supporting details. Therefore, the action of the AO in rejecting the books of account is held to be justified. 5.6 It is observed that the appellant declared a total turnover of Rs.18,75,600/- and a net profit of Rs.1,83,249/-, reflecting a profit rate of 9.77% for the year under consideration. The survey was conducted on 30.01.2018, during which unaccounted income of Rs.30,00,000/- was disclosed. Since the survey took place at the end of January, the AO considered the disclosed income as pertaining to a period of ten months. While completing the assessment, the AO extrapolated the unaccounted income to Rs.36,00,000/- for twelve months and computed business income by applying a net profit rate of 9.77%. Accordingly, unaccounted sales of Rs.3,68,47,492/- were worked out and added to the disclosed turnover of Rs.18,75,600/-, resulting in an estimated total turnover of Rs.3,87,23,092/- and a net profit of Rs.37,83,249/-. The appellant claimed that income was computed under presumptive taxation and that a profit rate of 9.77% was higher than the presumptive rate. However, it is noted that the appellant himself declared a net profit at 9.77% on the disclosed turnover. In view of this, the computation made by the AO is considered correct. 5.7 The appellant further argued that the disclosure made during the survey had no relevance to a period of ten or twelve months and that the addition of Rs.6,00,000/- for two months was unwarranted. However, it is held that the disclosure was made at the end of January and was based on the business activities carried out up to that point during the relevant year. Accordingly, the AO rightly computed the business income by considering the unaccounted income for ten months. 5.8 In light of the above discussion, the addition of Rs.6,00,000 made by the AO is upheld. Consequently, the ground of appeal raised by the appellant is dismissed.

4. On further appeal before the Tribunal, the ld.AR has submitted that the assessment order is alleged to be bad in law, without jurisdiction, and contrary to principles of equity, natural justice, and fair play. He further submitted that once the Assessing Officer rejected the books of accounts, the assessment should have been framed u/s. 144, not section 143(3). The rejection of accounts is argued to be unlawful, as section 145(3) was not applicable to the facts. The Assessing Officer erred in rejecting the books, and the Commissioner (Appeals) failed to appreciate this defect. The addition of Rs.6,00,000/- as undisclosed Commissioner (Appeals). Ld.AR furthermore, stated that the Assessing Officer allegedly made baseless estimations of unaccounted income and sales, including extrapolating figures for 12 months and for periods beyond the survey, without any rational basis. Admissions made during the survey, according to the assessee, cannot be extended beyond the survey period. After rejecting the books of accounts, the Assessing Officer should not have relied on the net profit rate shown in those very books to estimate income.

Order pronounced in the open court on 7th January, 2026 at Chennai.