M/S. G.C. SHAW & CO.,KOLKATA vs. ITO, WARD - 37(1),, KOLKATA

The assessee in the present case is a partnership firm which is engaged in the business of trading of India Made Foreign Liquor on wholesale and retail basis. The return of income for the year under consideration was filed by it on 23.09.2013 declaring a total income of Rs. 3,54,270/-. During the course of assessment proceedings, it was noticed by the AO that the assessee has debited a sum of Rs. 5,63,59,868/- on account of purchases in the profit and loss account whereas the figure of assessee’s purchases as reflected in 26AS data base was Rs. 5,74,39,838/-. Since the assessee could not offer any satisfactory explanation as regards the said difference of Rs.

Assessment Year: 2013-14 M/s. G.C. Shaw & Co. 1079,970/- in purchase, the AO treated the same as undisclosed purchase and after adding the gross profit @ 3.211%, he worked out the unaccounted sales of the assessee at Rs. 11,14,648/-. The amount of undisclosed sales so worked out was added by the AO to the total income of the assessee in the assessment completed u/s 143(3) vide an order dated 18.01.2016. On appeal, the Ld. CIT(A) confirmed the said addition made by the AO. Aggrieved by the order of the Ld. CIT(A), the assessee has preferred this appeal before the Tribunal.

I have heard the arguments of both the sides and also perused the relevant material available on record. As rightly contended by the learned counsel for the assessee, when the unaccounted purchases allegedly made by the assessee were found by the AO and the corresponding unaccounted sale made out of the said purchases was presumed by him, there was no justification to make the addition on account of the entire amount of such unaccounted sale and the same should be restricted to gross profit earned by the assessee on such unaccounted sales. I therefore find merit in the stand of the assessee that when unaccounted purchases and unaccounted sale are there as allegedly pointed out by the AO, what can be considered for addition is only the difference representing the profit earned by the assessee on such unaccounted transactions. At the same time, I also find merit in the contention of the ld. DR that such unaccounted transactions require some investment that is required to be made by the assessee. Having considered all the facts and circumstances of the case including especially the nature of assessee’s business, I consider it fair and proper to estimate such investment to the extent of two months of unaccounted purchases. I accordingly modify the impugned order

In the result, the appeal of the assessee is partly allowed. Order Pronounced in the Open Court on 22nd November, 2019.