Case Law Details
JCIT Vs Simalin Chemical Industries Pvt. Ltd. (ITAT Ahmedabad)
he basis of making the addition on account of undisclosed income of the assessee was the cash found during the course of search proceedings by the excise department. There was the physical cash found by the excise department during the course of search amounting to ₹ 2,28,24,780/- which was admitted by the assessee before the income tax Department as income from undisclosed sources. However, the excise department subsequently calculated the suppressed sales. Accordingly the assessee based on the suppressed sales has calculated the amount of profit representing the GP embedded in such unaccounted sales pertaining to different years. However, the AO has adopted the GP at the rate of 25% for making the addition on the unaccounted sales determined by the excise department.
From the preceding discussion, there remains no ambiguity to the fact that the assessee was engaged in making clandestine sale in order to avoid the excise liability. The assessee from such activity has generated the income of ₹ 2,28,24,780/- which was the cash found during the course of search by the excise department. Thus, it is inferred that such cash was generated by the assessee from the unaccounted business sales carried out by it. Now the question arises how to determine the income of the assessee from the undisclosed business activities. The excise department has worked out the unaccounted sales amounting to ₹ 6,40,52,547/-. Indeed such amount of unaccounted sale is inclusive of gross profit which alone can be brought to tax in the given facts and circumstances. If we apply the gross profit ratio even at the rate of 25% on undisclosed sales, the amount of profit is worked out at ₹ 1,60,13,137/- which is much less than the amount of income admitted by the assessee before the income tax Department. Accordingly the assessee has treated the difference amount as income from other sources. In nutshell the assessee has disclosed the income in different assessment years subject to the maximum amount of ₹ 2,28,24,780/- which was accepted as income before the revenue. It is also a fact on records that the assessee has duly complied with his commitment made before the revenue for disclosing the income of the unaccounted cash. The revenue has not brought anything on record pointing out the amount of suppressed sale exceeds what has been determined by the excise department. Thus in the absence of any contrary information, we hold that the amount of suppressed sale stands at ₹ 6,40,52,547/- which contains the amount of gross profit of the assessee not offered to tax.
Be that as it may be, the income of the assessee cannot exceed the amount of cash found during the course of search by the excise department. It is for the reason that the maximum amount which was found unaccounted can only be brought to tax until and unless there is any other material found during the search suggesting that there was any other income other than the income embedded in the suppressed sales.
Furthermore, the revenue has not brought any material on record suggesting that the assessee has made suppressed sales over and above the amount determined by the excise department. Thus in the absence of any information available on record, we hold that the AO has wrongly determined the gross profit by working out the suppressed sale more than the amount determined by the excise department.
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