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| The Tax Publishers2020 TaxPub(DT) 2045 (Ahd-Trib) INCOME TAX ACT, 1961
Section 153A
Only percentage of profit embedded in undisclosed receipts could be added to the total income of assessee for the reasons that if the entire amount of receipts would be added to the total income of the assessee then it would result in exorbitant profit, which was not possible in the line of business of the assessee and further, there was no information suggesting that the assessee made some investment for earning of such undisclosed receipts.
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Search and seizure - Assessment under section 153A - Undisclosed receipts - Whether entire amount of undisclosed receipts or only percentage of profit embedded in undisclosed receipts would be added
Assessee-firm was engaged in business of property development and construction of buildings. There was survey for the year under consideration at the business premises of the assessee. During course of survey, certain dairies were found containing details of some transaction. When the same was confronted to one of the partner of the assessee, he admitted to disclose the unaccounted income on the basis of transaction noted in the diaries. But, the assessee did not offer the same in the return on the reasoning that it did not represent the undisclosed income. However, the AO disagreed with the submission of the assessee and computed the undisclosed income after providing benefit of cash accounted in the regular books on the basis of receipts. Accordingly, he made addition to the total income of the assessee. Held: It was transpired that the transactions shown in the diary were business receipts and part of it was already disclosed in the regular books of account. Further, only percentage of profit embedded in such receipts could be added to the total income of the assessee for the reasons that if the entire amount of receipts would be added to the total income of the assessee then it would result in exorbitant profit, which was not possible in the line of business of the assessee and further, there was no information suggesting that the assessee made some investment for earning of such undisclosed receipts. Further, Tribunal considered the average profit of assessee's sister concern engaged in similar line of business as the same was showing profit in all the three years where as the assessee was showing profit in current year only, and accordingly, directed the AO to tax the element of profit embedded in such business receipts at the rate of 7.21% by treating the same as net profit chargeable to tax.
REFERRED : CIT v. Gurubachhan Singh J. Juneja (2008) 302 ITR 63 (Guj) : 2008 TaxPub(DT) 1637 (Guj-HC) CIT v. Samir Synthetics Mill (2010) 326 ITR 410 (Guj) : 2010 TaxPub(DT) 0044 (Guj-HC) CIT v. S. Khadar Khan Sons (2008) 300 ITR 157 (Mad) : 2008 TaxPub(DT) 0787 (Mad-HC) CIT v. S. Khader Khan Son (2012) 25 Taxmann.com 413 (SC) : 2012 TaxPub(DT) 3088 (SC)
FAVOUR : Partly in favour of assessee
A.Y. :
IN THE ITAT, AHMEDABAD BENCH
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