DCIT Vs Vividham Sweets & Dry Fruits (ITAT Mumbai)
ITAT Mumbai Rejects ₹5.39 Cr Addition Based on Two Days’ Bills, Calls AO’s Math ‘Perplexing’
Income Tax Appellate Tribunal (ITAT), Mumbai Bench, has upheld the Commissioner of Income Tax (Appeals) (CIT(A))’s decision to delete a substantial addition of ₹5.39 crore made by the Assessing Officer (AO) against Vividham Sweets & Dry Fruits. The ITAT criticized the AO’s methodology, which extrapolated a massive income based on merely two days’ worth of bills, describing the calculation as something that “may impress a student of mathematics but does not make any sense so far as the income tax proceedings are concerned.”
The dispute for the Assessment Year 2019-20 arose from a survey action conducted under Section 133A of the Income Tax Act, 1961, on October 20, 2018, at Vividham Sweets & Dry Fruits, a sweets and snacks shop in Borivali, Mumbai. During the survey, various documents, including cash books, cash memos, loose papers, and a passbook, were found and impounded.
The core of the AO’s addition stemmed from two specific bills found during the survey, dated October 24, 2018, and October 25, 2018. These bills amounted to ₹25,467/- and ₹68,977/- respectively. The AO, observing that the business primarily operated on a token-based cash system, estimated that approximately 200 bills were issued per day based on the token numbers found. From these two days’ bills and an estimated average bill value, the AO proceeded to extrapolate the daily turnover, calculating an estimated daily turnover of ₹1,35,000/- for October 24, 2018, and ₹1,60,400/- for October 25, 2018. From these extrapolated daily figures, the AO then applied this estimation for the entire year, arriving at a substantial cash income of ₹5,39,10,500/-, which was added back under Section 69A of the Act as unexplained money.
