Anup Kumar Aggarwal Vs ACIT (Central) (ITAT Rajkot)
Extrapolation of Unrecorded Sales Without Incriminating Material Invalid: ITAT Chandigarh Deletes ₹60.42 Lakh Addition for AY 2022-23
The Chandigarh ‘B’ Bench of the Income Tax Appellate Tribunal, Chandigarh Bench allowed the appeal of Shri Anup Kumar Aggarwal for AY 2022-23 and deleted the addition of ₹60.42 lakh made towards alleged unaccounted sales.
The assessee, proprietor of M/s HB Foods, was subjected to a search on 04.11.2022. While certain unrecorded sales were allegedly found for AY 2023-24, no incriminating material whatsoever was found for AY 2022-23. Despite this, the AO extrapolated the ratio of alleged unaccounted sales (44.5%) and applied an average GP rate of 22.62%, making an addition of ₹60.42 lakh as business income under section 28. The CIT(A) upheld the action.
The Tribunal held that additions in search assessments cannot be made on presumption or extrapolation, and must be strictly based on incriminating material found during search for the relevant year. It noted that:
- No document or evidence indicated unrecorded sales for AY 2022-23;
- Regular books were maintained and no defects were pointed out;
- Sales for the year were higher than earlier years, negating any presumption of suppression; and
- The AO himself did not apply extrapolation for earlier years or even for the search year period (Nov 2022–Mar 2023), exposing the inconsistency in approach.
Relying on the jurisdictional Punjab & Haryana High Court decision in V.M. Spinning Mills and the Delhi High Court ruling in Saksham Commodities, the ITAT reiterated that extrapolation of seized material is impermissible in law.
Accordingly, the impugned addition was deleted in full, and the assessee’s appeal was allowed.
FULL TEXT OF THE ORDER OF ITAT RAJKOT
