DCIT Vs Radhika Vegetables Oils Pvt. Ltd. (ITAT Nagpur)
The ITAT Nagpur dismissed the Revenue’s appeal and upheld the order of the CIT(A) restricting addition on unrecorded sales to the gross profit element instead of taxing the entire amount under Section 69A of the Income Tax Act.
The assessee, a private limited company engaged in manufacturing palm oil, filed its return for AY 2022-23 declaring income of ₹5.35 crore. Following a search and seizure action under Section 132 conducted at the assessee’s group on 25.08.2021, certain loose papers and note-pads were seized. Based on these materials, the case was selected for compulsory scrutiny. After assessment proceedings under Section 143(3), the Assessing Officer (AO) made an addition of ₹1.21 crore as unexplained money under Section 69A on account of alleged unrecorded cash sales.
On appeal, the CIT(A) observed that in earlier assessment years, the ITAT had already upheld taxation of only the average gross profit embedded in unaccounted sales. Since the AO had not brought any new or distinguishing facts on record for the current year, the CIT(A) directed the AO to restrict the addition to 11.64% of the unrecorded cash sales.
Before the Tribunal, the Revenue argued that the seized materials clearly established generation of unaccounted cash outside the books and therefore the entire amount should be treated as unexplained income under Section 69A. The assessee contended that the issue was already covered by earlier Tribunal decisions in its own case and that once sales were accepted, corresponding purchases and business expenditure could not be ignored. According to the assessee, only the profit element embedded in such sales could be taxed.
