Case Law Details
DCIT Vs Radhika Vegetables Oils Pvt. Ltd. (ITAT Nagpur)
The ITAT Nagpur dismissed the Revenue’s appeal and upheld the order of the CIT(A) restricting addition on unrecorded sales to the gross profit element instead of taxing the entire amount under Section 69A of the Income Tax Act.
The assessee, a private limited company engaged in manufacturing palm oil, filed its return for AY 2022-23 declaring income of ₹5.35 crore. Following a search and seizure action under Section 132 conducted at the assessee’s group on 25.08.2021, certain loose papers and note-pads were seized. Based on these materials, the case was selected for compulsory scrutiny. After assessment proceedings under Section 143(3), the Assessing Officer (AO) made an addition of ₹1.21 crore as unexplained money under Section 69A on account of alleged unrecorded cash sales.
On appeal, the CIT(A) observed that in earlier assessment years, the ITAT had already upheld taxation of only the average gross profit embedded in unaccounted sales. Since the AO had not brought any new or distinguishing facts on record for the current year, the CIT(A) directed the AO to restrict the addition to 11.64% of the unrecorded cash sales.
Before the Tribunal, the Revenue argued that the seized materials clearly established generation of unaccounted cash outside the books and therefore the entire amount should be treated as unexplained income under Section 69A. The assessee contended that the issue was already covered by earlier Tribunal decisions in its own case and that once sales were accepted, corresponding purchases and business expenditure could not be ignored. According to the assessee, only the profit element embedded in such sales could be taxed.
The Tribunal noted that identical issues had already been decided in the assessee’s own cases for earlier assessment years. It observed that the AO had not demonstrated that purchases and related business expenses connected with the unrecorded sales had already been accounted for in the profit and loss account. Relying on earlier decisions and principles of consistency and judicial discipline, the Tribunal upheld the CIT(A)’s order restricting the addition to the gross profit rate of 11.64% on the unrecorded sales and dismissed the Revenue’s appeal.
FULL TEXT OF THE ORDER OF ITAT NAGPUR
This appeal filed by the Revenue is directed against the order of Ld. Commissioner of Income Tax (Appeals)-3, Nagpur, (for short, “CIT(A)”), dated 26/03/2025 passed under section 250 of the Income Tax Act, 1961 (for short, “Act”) which is emanating from the assessment order dated 28.02.2024 passed u/s. 143(3) of the Act by the DCIT, Central Circle, Akola, for the Assessment Year 2022-23.
2. The sole issue raised by the Revenue in this appeal is that Ld. CIT(A) erred in deleting the addition of Rs.1,21,72,000/- made by the Ld. Assessing Officer (AO) u/s. 69A of the Act.
3. Brief facts of the case are that assessee is a private limited company, engaged in the business of manufacturing of palm oil. It has filed its return of income for the AY 2022-23 declaring income of Rs.5,35,09,880/- on 31.10.2022. A search and seizure action u/s. 132 was conducted in assessee’s group at Visakhapatnam on 25.08.2021 and certain loose papers and note-pads were found and seized. Consequent to search action, case was selected for compulsory scrutiny. Statutory notices u/s. 143(2) & 142(1) of the Act were issued and served upon the assessee. In response to the notice, assessee furnished various details including bank statement, profit & loss account, secured loans and the details of interest received etc. After considering the details submitted by the assessee, Ld. AO completed the assessment u/s.143(3) making addition of Rs. 1,21,72,000/- on account of unexplained money u/s. 69A of the Act.
4. Aggrieved with the order of Ld. AO, assessee preferred appeal before the Ld. CIT(A), who observed that in earlier years for A.Ys. 2019-20 & 2021-22 the Hon’ble ITAT upheld the order of Ld. CIT(A) to tax only the average gross profit embedded in the unaccounted sales. Ld. CIT(A) further observed that Ld. AO has not brought on record any additional or absolutely new facts during the current year which would differentiate the facts of the earlier years and compel him to traverse in a different path. Therefore, following the decisions of Hon’ble ITAT in previous A.Ys. 2020-21 & 2021-22, he directed the Ld. AO to restrict the addition to 11.64% of unrecorded cash sales of Rs. 1,21,72,000/-
5. Dissatisfied and aggrieved with the order of Ld. CIT(A), Revenue is in appeal before this Tribunal. Ld. Departmental Representative (DR) relied upon the assessment order passed by the Ld. AO. It was submitted that during the course of search and seizure proceedings conducted u/s. 132 of the Act, certain incriminating loose papers and note-pads were found and seized which clearly evidenced unrecorded cash sales carried on by the assessee outside the regular books of account. He further submitted that assessee failed to satisfactorily explain the nature and source of such unaccounted receipts before the Ld. AO. Therefore, Ld. AO rightly treated the amount of Rs.1,21,72,000/- as unexplained money u/s. 69A of the Act. Learned DR further contended that Ld. CIT(A) erred in restricting the addition merely to gross profit at 11.64% by following the orders of earlier years without independently appreciating the facts and evidences pertaining to the current assessment year. According to the learned DR, the seized material clearly established the generation of unaccounted cash outside the books and therefore the entire amount was liable to be assessed as unexplained income u/s. 69A of the Act. Accordingly, he prayed that the order of the Ld. AO be restored. However, he failed to pinpoint about any infirmities in the decision of this bench relied upon.
6.On the contrary, learned counsel for the assessee strongly supported the order passed by the Ld. CIT(A). It was submitted that the issue involved in the present appeal is squarely covered by the orders of the Hon’ble ITAT in assessee’s own case for the earlier assessment years, wherein under exactly identical facts and circumstances, the Tribunal upheld the estimation of only profit element embedded in the alleged unaccounted sales instead of sustaining the entire addition u/s. 69A of the Act. He further submitted that the addition made by the Ld. AO was solely based on certain loose sheets and note-pads seized during the course of search proceedings and there was no independent material to establish that the entire alleged cash sales represent the unexplained money liable to be taxed u/s. 69A of the Act. It was argued that once sales are accepted, corresponding purchases and business expenditure cannot be ignored and only the profit element embedded in such sales could be brought to tax. It was further submitted that the Ld. CIT(A), after considering the decisions of the Tribunal in assessee’s own case for A.Ys. 2020-21, 2021-22 and 2022-23, rightly directed the Ld. AO to restrict the addition to 11.64% being the average gross profit rate on the alleged unrecorded cash sales of Rs.1,21,72,000/- and the Revenue has not brought on record any distinguishing facts or circumstantial evidence in the year under consideration as compared to earlier years. Therefore, the order of the Ld. CIT(A) being consistent with the views countenanced by the very same bench wherein Hon’ble AM was a member of the Corum and was also the author, particularly in view of the fact that these orders were never overturned by any higher authority, deserves to be upheld.
7. We have heard rival contentions of both the parties and perused the material available on record. We find that an identical issue had come up for consideration before this Tribunal in assessee’s own case in ITA No. 236/Nag/2023 for Assessment Year 2021-22 and also ITA No.17/Nag/2024 for Assessment Year 2019-20. The Coordinate Bench of the Tribunal, vide order dated 30.10.2024, dismissed the appeal of the Revenue by holding as under:–
“9. We have gone through order of the learned CIT(A) as well as judgment cited by the assessee supporting the case of the assessee. We find that the Assessing Officer has held that the entire undisclosed sales is undisclosed income of the assessee. The learned Departmental Representative strongly argued by relying upon the order of the Assessing Officer stating that the entire sale is the income of the assessee, which is a well settled proposition. We find nothing from the order passed by the Assessing Officer which shows that the Assessing Officer pointed out purchases and expenses relating to undisclosed sales which were booked in the Profit & Loss Account. Hence, the basis of such ground relating to this effect which has been raised by the Revenue is beyond our comprehension. Under these circumstances, we do not find any infirmity in the impugned order passed by the learned CIT(A) and confirmed the addition of gross profit @11.65%, which is average of last three years’ gross profit on unrecorded sales of Rs. 3,16,16,703. Considering these facts, the learned CIT(A) has rightly and fairly calculated the gross profit @11.65% and we uphold the order passed by the learned CIT(A) by dismissing the grounds no.1, 2 and 3, raised by the Revenue.
8. Since the issue involved in the present appeal is squarely covered by the aforesaid decision of the Coordinate Bench of the Tribunal rendered in assessee’s own case for the earlier assessment years, which has been further strengthened by the orders of Hon’ble High Courts of Madhya Pradesh & Gujarat and no distinguishable facts have been brought on record by the Revenue, we find no infirmity in the order passed by the Ld. CIT(A) and which requires no interference from our end. Accordingly, the order of the Ld. CIT(A) is upheld and the grounds raised by the Revenue are dismissed by placing reliance on the maxim of stare decisis and the rule of consistency judicial discipline and propriety, as enunciated in Ashok Leyland Ltd. vs. State of Tamil Nadu [(2004) 3 SCC 144].
9. In the result, appeal filed by the Revenue is dismissed.
Order pronounced on 14.05.2026 under Rule 34 of Income Tax (Appellate Tribunal) rules 1963
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