Mass Readymix Vs ACIT (ITAT Chennai)
Only GP on Unaccounted Purchases is Income – ITAT Reaffirms Legal Principle- Confession Isn’t Computation – Tribunal Requires Evidence for Rates
Mass Readymix, a partnership firm engaged in manufacturing ready-mix concrete, was subjected to survey u/s 133A on 21.09.2017 (along with search on one of the partners). During survey, folders were found showing unaccounted purchases of river sand for all three years. Based on this, the AO reopened AYs 2016-17 & 2017-18 u/s 148 & completed assessments u/s 147 r.w.s. 144, while AY 2018-19 was assessed u/s 143(3).
AO relied solely on the statement of the managing partner & adopted ₹1,500 per unit as the price of river sand, treating the entire value of unrecorded purchases as undisclosed income. He made additions of ₹69.34 lakh, ₹72.07 lakh & ₹7.38 lakh respectively. He also added ₹6.50 lakh as unexplained sundry creditors (AY 2017-18) & ₹4.84 lakh as unexplained stock difference (AY 2018-19).
CIT(A) held that entire unaccounted purchases cannot be treated as income—only the profit element (GP%) embedded therein is taxable. He directed AO to apply the average GP of past 5 years. However, he confirmed the rate of ₹1,500 per unit, as Assessee failed to prove lower cost, & also confirmed ₹6.50 lakh sundry creditor addition.
