PCIT Vs Asian Tiles Pvt. Ltd. (Gujarat High Court)
The Gujarat High Court considered a group of Revenue appeals arising from a common order of the Income Tax Appellate Tribunal (ITAT) involving assessees subjected to search and seizure operations. The Excise Department had also conducted inspections and found prima facie evidence of clandestine removal of goods to evade excise duty. The Assessing Officer relied on seized material and made additions based on estimated gross profit from clandestinely disposed goods, along with additions for unexplained investments.
On appeal, the Commissioner (Appeals) granted partial relief by holding that only net profit, and not gross profit, should be taxed. The Commissioner also held that the additional income qualified for deduction under Section 80IB of the Income-tax Act. The Tribunal confirmed the finding of clandestine removal and suppressed profit but reduced the addition to 1% of disclosed sales while maintaining the direction to allow deduction under Section 10B on the additional income.
The High Court observed that it did not agree with the Tribunal’s approach of reducing the additions to 1% of disclosed sales, stating that this exercise lacked any basis and there was no correlation between the estimated undisclosed sales and the disclosed sales.
