ACIT Vs Eplast Build Techno Industries LLP (ITAT Ahmedabad)
Ahmedabad ITAT Holds Only 8% Profit on Unaccounted Sales Taxable, Not Entire Receipts
The Ahmedabad ITAT partly allowed the Revenue’s appeals by holding that only the profit element embedded in unaccounted sales is liable to tax and not the entire unaccounted receipts. During a survey, data extracted from the assessee’s accounting software revealed unaccounted sales receipts, which the Assessing Officer had added in full as income. The CIT(A), however, restricted the addition to 6% of the unaccounted receipts, accepting the assessee’s contention that corresponding unaccounted purchases had also not been recorded.
The Tribunal observed that the assessee, engaged in the business of purchase and sale of second-hand furniture, had not maintained an item-wise stock register and failed to establish that every unaccounted sale was backed by a corresponding unaccounted purchase. Considering the overall facts, the Tribunal held that the profit embedded in the unaccounted sales should be estimated at a higher rate than adopted by the CIT(A).
Accordingly, the Tribunal modified the CIT(A)’s order and directed that 8% of the unaccounted sales be brought to tax instead of 6%, while reiterating that the entire unaccounted sales could not be assessed as income. The Revenue’s appeals were partly allowed, and the assessee’s cross-objections were dismissed.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The captioned appeals by the Revenue and the corresponding Cross Objections preferred by the assessee are against the separate orders of the Ld. Commissioner of Income Tax (Appeals)-12, Ahmedabad [hereinafter referred to as ‘Ld. CIT(A)’] dated 26/11/2025 passed u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for the Assessment Years (AYs) 2018-19 & 2019-20 respectively. ITA No. 107/Ahd/2026 is taken as the lead case for the purpose of narration of facts.
ITA No. 107/Ahd/2026 & C.O. No. 36/Ahd/2026:
2. The brief facts of the case are that the assessee is involved in the business of purchase and sale of second hand furniture. A survey action was carried out in the case of the assessee on 24.10.2018. During the course of survey action, certain data in the shape of the Miracle Accounting Software was extracted from the computer of the assessee, which showed that the assessee had not accounted for the entire receipts in the books of account. A statement of the partner of the assessee firm namely Mohan Ratilal Varsani was recorded, wherein, he has admitted that the assessee had not accounted for all the receipts in the books of account maintained by it. For the assessment year under consideration an amount of Rs. 3,66,68,344/- was noted as unaccounted receipts. The Assessing Officer (hereinafter referred to as “the AO”), therefore, made the addition of the said unaccounted receipts as income of the assessee.
3. Being aggrieved by the said order of the AO, the assessee preferred appeal before the Ld. CIT(A).
4. Before the Ld. CIT(A), the assessee submitted that there was another tally data found from the computer which showed that the assessee had also not booked the corresponding purchases. The AO has taken note of only unaccounted sales but has not taken into consideration the unaccounted purchases. The assessee submitted before the Ld. CIT(A), that only the profit element embedded in the unaccounted sales should be added into the income of the assessee and not the entire sale receipts. Considering the above submissions of the assessee, the Ld. CIT(A) restricted the addition to the extent of 6% of the unaccounted receipts.
5. Being aggrieved by the said order of the Ld. CIT(A), the Revenue has come in appeal contesting the action of the Ld. CIT(A) in restricting the addition to the extent of 6% only as against the addition made by the AO of the total unaccounted receipts. Whereas, the assessee in its Cross Objections has pleaded that the estimation of 6% profit element was on higher side as compared to the profit shown @ 1 to 2% in respect of the accounted for sales.
6. We have considered the rival submissions and gone through the record.
7. In this case, the assessee has not maintained item-wise stock register. Therefore, we find force in the contention of the Ld. DR that there may be certain stock, the purchase cost relating to which might have been included by the assessee but, the sales not booked in the books of account. Though, the Ld. AR of the assessee has submitted that the unaccounted sales were relating to the corresponding unreported purchases, however, he has failed to demonstrate item-wise details in this respect. Considering the overall facts and circumstances of the case, we are of the view that in this case the profit element in the unaccounted sales should be on higher side than that estimated by Ld. CIT(A). Therefore, taking into consideration the overall facts and circumstances of the case, we modify the order of the Ld. CIT(A) and hold that the profit element @ 8% of the unaccounted sales should be added to the income of the assessee. We confirm the addition to that extent.
8. With the above observation, this appeal of the Revenue is partly allowed whereas Cross Objection of the assessee is hereby dismissed.
ITA No. 108/Ahd/2026 and corresponding C.O. No. 37/Ahd/2026
9. Since the facts and issues involved in this appeal and the corresponding Cross Objections are identical to that we have discussed above, therefore, our findings given above will mutatis mutandis apply to this appeal also and the addition confirmed by the Ld. CIT(A) in this case also is modified from 6% to 8% of the unaccounted receipts. This appeal of the Revenue is, accordingly, partly allowed and the corresponding Cross Objection of the assessee is hereby dismissed.
10. In the combined result, both the appeals of the Revenue are partly allowed, whereas, the Cross Objections of the assesse are hereby dismissed.
Order pronounced in the Open Court on 31/07/2026
