This Tax Appeal by the Revenue is directed against the order dated 21st January 2011 of the Income Tax Appellate Tribunal, Ahmedabad Bench 'C' in ITA No. 897/Ahd/ 2009. 1.1 The appellant has raised following question proposing it to be a substantial question of law involved in the appeal.
“Whether the Appellate Tribunal is right in law and on facts in deleting the addition to the extent of Rs.2,15,562/ as against the addition of Rs.27,04,785/ made by the Assessing Officer?”
2.0 We have heard Mrs. Mauna Bhatt, learned advocate for the appellant.
3.0 The facts involved in the appeal with reference to which the aforesaid question is proposed are thus the respondent assessee is a proprietary concerned engaged in the business of selling of clothes on wholesale basis and selling of Punjabi suits and embroidery work etc. The assessee declared his total income Rs.14,88,490/ for the Assessment Year 200506 and therein he disclosed gross profit of Rs.43,86,670/ . This gross profit was 8.58% on the total volume of sales. The percentile gross profit in the immediately preceding year was 8.69%. During the search carried out at the place of the assessee, it was noticed that he was a proprietor and owner of a proprietary firm in the name of M/s. K. P. Rakesh Kumar and he was also running business in different capacity from the same shop as private limited company in the name of K. P. Rakesh Kumar Cloth Pvt Ltd., and the respondent Nanikram S. Jhamtani was the main Director of that company which was carrying on the same business of garments.
3.1 In the statement of assessee recorded under Section 132(4), he declared the stock of Rs.99,09,905/ in the books of proprietary firm and Rs.16,71,283/ in the books of Private Limited Company. On the basis of difference in stock declared between one declared by assessee in his statement, and one found in the actual inventory, the Assessing Officer finally added Rs.27,04,785/ in the income of assessee as sales treating the same to be outside the books of account.
3.2 While entertaining the assessee's appeal, the Appellate (Commissioner) was of the view that accounts of the asseessee were not reliable. He rejected that books of accounts. He estimated the gross profit at 9% of the total sales and gave relief to the extent of Rs.24,89,223 confirming the addition to the extent of Rs.2,15,562/.
4.0 The Revenue preferred appeal before the Appellate Tribunal which came to be dismissed as per the impugned order. The Tribunal was of the view that even as the discrepancy in the stock was found on estimated basis, the addition made in the income of assessee as unaccounted sale was not justified because it was on the basis of figure of total sales which cannot be treated as profit of the assessee and the net profit had to be arrived at, and such profit would qualify for deduction.
5.0 The Tribunal relied upon the decision of this High Court in CIT vs. Presidential Industries, 258 ITR 654 for the proposition that 'the amount of sales could not represent the income of the assessee, as the sales only represented the price received by the seller of the goods, only the realisation of the excess over the cost incurred could form part of the profit included in the consideration for the sales'.
5.1 The Tribunal observed as under:
“.... The entire amount of the sales would not represent the income of the assessee who has not disclosed the sales. It is admitted fact that the stock during the course of survey was found deficit/short fall. Therefore, it could be presumed that the deficit stock was sold outside the books of accounts. The sales therefore represent price received by the seller of the goods. Only the realisation of the excess over the cost incurred could form part of the profit included in the consideration for the sales. No material is brought on record to the effect that the investments by way of incurring cost in acquiring the goods, which were sold had been made by the assessee and that the investment was also not disclosed. The ld. CIT(A) noted that difference in stock was worked out on oral statement of assessee which was not corroborated by actual figure. Earlier statement was also retracted. It is also a matter of record that stocks of bothy the concerns were mixed up at survey.”
5.2 It was further observed that, “.....Even if higher GP rate is applied against unaccounted sales, as made by the AO, the addition would be more or less the same as is considered by the CIT(A). We therefore do not find any error in the order of the learned CIT(A) in sustaining part addition on the matter in issue, we confirm his finding and dismiss the Revenue's appeal.”
6.0 The findings of the Tribunal are proper and are based on correct principle of law. We are in agreement with it. In the facts and circumstances no substantial question of law arises for consideration of this Court.
7.0 Accordingly, this Tax Appeal is dismissed.
Amit [V. M. SAHAI, J.] [N. V. ANJARIA, J.]