What did the Tribunal hold?

The Tribunal directed the AO to recompute the income by applying a gross profit rate of 3.23% instead of the negative GP rate shown by the assessee, considering the GP rates of earlier years and the fact that the AO had not rejected the books of account.

During a survey, the assessee made a disclosure of Rs. 40,19,449/-. The assessee declared a net income after adjusting the disclosure against a loss. The Assessing Officer (AO) recast the profit and loss account and made an addition of Rs. 35,93,912/-, which was confirmed by the CIT(A).

What were the issues?

Whether the AO was justified in making an addition based on a recast profit and loss account, and whether the assessee's claim of purchases was valid.

Ashwin Khemka vs DCIT | ITAT Mumbai 2016

Income Tax Appellate Tribunal, “A” BENCH, MUMBAI

Before: SHRI R. C. SHARMA & SHRI PAWAN SINGH

For Appellant: Shri Mehul Shah, Smt. Vinita Menon

For Respondent: Smt. Vinita Menon

सुनवाई की तायीख / : 22.4.2016 Date of Hearing घोषणा की तायीख / : 23.6.2016 Date of Pronouncement आदेश / O R D E R Per R. C. Sharma, A. M.: This is an appeal filed by the assessee against the order by the ld. CIT(A) for A.Y. 2006-07 in the matter of order passed u/s. 143(3) of the Income Tax Act.

Rival contentions having been heard and record perused. Facts in brief are that that there was a survey action conducted on the premises of the assessee on February 9, 2006 wherein a disclosure was made of Rs.40,19,449/- as under:

(A.Y. 2006-07) Ashwin Khemka vs. Dy. CIT Renovation expenses Rs.8,01,000/- Jewellery purchase Rs.12,00,000/- Excess cash Rs.4,04,135/- Unaccounted stock Rs.16,14,314/- The assessee adjusted the above disclosure against the net loss as per the profit and loss account and net income of Rs.16,91,260/- was declared in the return of income. During the course of assessment, the assessee submitted two sets of profit and loss account – pre survey and post survey. The pre survey P & L a/c showed net loss of Rs.22,19,575/-, whereas there was a profit of Rs.66,77,370/- as on the date of survey. The AO considered the trading and P & L a/c filed upto the date of survey as well as after the date of survey. P & L account so filed by the assessee was recasted by the AO wherein profit was arrived at Rs.11,96,589/- as against loss of Rs.22,90,575/- shown by the assessee. It was contended by the assessee that the A.O. has not considered the purchases made amounting to Rs.35,93,912/-. The case was remitted back by the CIT(A) to the A.O. In the remand report, the AO found that the purchases was shown from a sister concern and which was not disclosed at the time of survey and it was only meant to reduce the profit so arrived at. Accordingly, he rejected the assessee’s contention and after considering the disclosure so made assessed income at Rs.49,51,480/-. Thus, an addition of Rs.35,93,912/- was made by the AO and confirmed by CIT(A). The assessee is in further appeal before us.

We have considered the rival contentions and carefully gone through the orders of the authorities below and found from the record that without showing any genuine and cogent reason, the assessee has shown loss during the year under consideration and worked out the gross loss at Rs.15,76,195/-. Thus the GP as per the calculation furnished before us works out at negative of 3.53% as against GP of 3.32% to 5.97% in the earlier years. However, the A.O. has nowhere rejected the books of account, therefore, considering the totality and facts and circumstances of the case and also (A.Y. 2006-07) Ashwin Khemka vs. Dy. CIT keeping in view the GP rate shown by the assessee in the earlier year, we direct the A.O. to recompute the income by taking gross profit rate of 3.23% as against negative GP rate shown by the assessee at 3.52%. Thus, the A.O. has to recompute the net profit after applying GP rate of 3.32%. We direct accordingly.

In the result, the assessee’s appeal is allowed in part. Order pronounced in the open court on June 23, 2016 Sd/- Sd/- (PAWAN SINGH) (R. C. SHARMA) न्मायमक सदस्म / JUDICIAL MEMBER रेखा सदस्म / ACCOUNTANT MEMBER भुंफई/Mumbai; ददनांक/Dated : 23.06.2016 व.यन.स./Roshani, Sr. PS आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : अऩीराथी / The Appellant 1. प्रत्मथी / The Respondent 2. आमकय आमुक्त(अऩीर) / The CIT(A) 3. आमकय आमुक्त / CIT - concerned 4. ववबागीम प्रयतयनधध, आमकय अऩीरीम अधधकयण, भुंफई / DR, ITAT, 5. Mumbai गार्ड पाईर / Guard File 6. आदेशाि सार/ BY ORDER,

ASHWIN KHEMKA,MUMBAI vs. DCIT 23(1), MUMBAI

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