Calories Count Vs DCIT (ITAT Amritsar)
Cooking the Books? Tribunal Relies on Cook’s Word, Taxing Tastefully- Tribunal Caps Profit at 8%; Suppressed Turnover in Food Delivery Business – Profit to be Taxed @ 8% u/s 44AD: ITAT Amritsar:
Facts
- Assessee, a partnership firm engaged in preparing & delivering meals, was surveyed u/s 133A on 18.01.2019.
- Survey yielded receipt books (Annexure C-1 to C-3), laptops & pen drive containing “master sheet” of ~100–110 clients, attendance registers & staff details.
- Partner admitted that no books were maintained at time of survey. Cook also confirmed preparing food daily for 100–105 clients.
- Return filed later declared turnover of ₹87.34 lakh & net profit of ₹7.0 lakh (≈8%).
First Appeal (CIT(A))
- CIT(A) upheld additions, observing:
- Partner’s admission that no books were maintained.
- Sample receipts of clients (e.g., Smt. Dimple Bhatia) revealed contradictions between produced books & impounded documents.
- Cook’s sworn statement confirmed ~102–105 diets prepared daily.
- Books filed later were considered post-survey creations, hence unreliable.
Before Tribunal
Assessee’s plea:
- Books were not rejected u/s 145(3).
- Estimation cannot be based merely on survey statements (Kader Khan, 300 ITR 157, Mad HC).
- Relied on judgments: CIT v. Flexi Pack (319 ITR), CIT v. OM Overseas (315 ITR), CIT v. Anil Kumar (386 ITR), etc.
Revenue’s stand:
- Impounded receipts, master sheet, cook’s statement & partner’s admission all corroborated suppressed turnover.
- Books produced later were fabricated post-survey.
Revenue’s stand:
- Impounded receipts, master sheet, cook’s statement & partner’s admission all corroborated suppressed turnover.
- Books produced later were fabricated post-survey.
Tribunal’s Observations
- Impounded digital/physical records, cook’s statement & partner’s disclosure formed a consistent chain establishing suppression of sales.
- Later-produced books did not match with impounded data & were unreliable.
- Judicial precedents cited by Assessee were distinguishable since this was not a case of “mere survey statement” but of detected suppression of turnover.
Decision
- Tribunal upheld gross receipts of ₹1.87 crore as worked out by AO.
- However, instead of AO’s computation of ₹1.45 crore income, Tribunal applied presumptive profit rate of 8% u/s 44AD (since Assessee itself declared 8% in return).
- Directed AO to compute profit @ 8% of ₹1.87 crore = ₹14.96 lakh.
- Grounds on penalty & interest dismissed as premature/consequential.
- Appeal partly allowed.
Where survey reveals suppressed turnover corroborated by impounded documents & employee/partner statements, books filed later lose credibility. However, entire receipts cannot be taxed; only a reasonable profit rate (here 8% u/s 44AD) is to be applied.
Paid content
Become a Basic or Premium Member, or log in if you are already a Basic or Premium member.
