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| The Tax Publishers2020 TaxPub(DT) 0968 (Ctk-Trib) INCOME TAX ACT, 1961
Section 68
Entire amount of contract receipts cannot be taxed in the hands of assessee, only profit embedded therein can be taxed in hands of the assessee. Thus, AO was directed to estimate net profit @ 16% of unaccounted contractual receipts.
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Income from undisclosed sources - Addition under section 68 - Taxability of only profit element embedded in contract receipts -
Issue arose as to whether PCIT was right in modifying assessment order and directing AO to add entire undisclosed receipts as income of assessee. Held: Entire amount of contract receipts cannot be taxed in the hands of assessee, only profit embedded therein can be taxed in hands of the assessee. Since, action of PCIT to estimate net profit @ 8% of total contract receipts was confirmed, but this percentage could not be completely applied for estimation of net profit embedded in unaccounted contract receipts. Therefore, to cover possible leakage of revenue, AO was directed to estimate net profit @ 16% of unaccounted contractual receipts.
REFERRED : CIT v. Balchand Ajit Kumar (2003) 263 ITR 610 (MP) : 2003 TaxPub(DT) 1199 (MP-HC) R.R. Caryying Corporation v. Asstt. CIT (2009) 126 TTJ (CTK) 240 : 2009 TaxPub(DT) 1924 (Ctk-Trib)
FAVOUR : Partly in assessee's favour
A.Y. : 2013-14
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