INCOME TAX ACT, 1961

Section 143(3)

Assessment - Additions to income - Pursuant to survey action, unaccounted sales and purchases were admitted by assessee - Whether only profit percentage was to be brought to tax

Pursuant to statement recorded by the survey team during the survey proceedings, it was admitted that assessee made unaccounted sales and purchases. Issue was as regards determination of income from such unaccounted business. Held: Entire amount of receivables and the value of excess stock could not be treated as income of the assessee from the unaccounted business. Only a percentage of profit embedded in such amount of receivables could be brought to tax. Further, only profit percentage was to be brought to tax on account of such unaccounted purchases/excessive stock found during survey. Assessee claimed its gross profit ratio at rate of 4.57% of sales which was not disputed by revenue. Thus, justice will be served to revenue as well as to assessee if amount of receivables and excessive stock found during survey brought to tax at the rate of 5% of such amount put together.

Followed:CIT v. Sathyanarayan P. Rathi (2013) 38 Taxamann.com 402 (Guj) : 2013 TaxPub(DT) 703 (Guj-HC) and CIT v. President Industries. (2002) 258 ITR 654 (Guj) : 2002 TaxPub(DT) 56 (Guj-HC).

REFERRED : Prr. CIT, Burdwan v. Subarna Rice Mill (2018) 96 Taxmann.com 286 (Cal) and Vijay Trading Co. v. ITO (2016) 388 ITR 377 (Guj) : (2016) 76 Taxmann.com 366 (Guj) : 2016 TaxPub(DT) 3323 (Guj-HC).